PEOPLES BANCORP INC - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 000-16772

PEOPLES BANCORP INC.

(Exact name of Registrant as specified in its charter)

Ohio

31-0987416

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

138 Putnam Street,

P.O. Box 738,

Marietta,

Ohio

45750

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(740)

373-3155

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, without par value

PEBO

The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 35,364,250 common shares, without par value, at October 31, 2023.

Table of Contents


Table of Contents

PART I – FINANCIAL INFORMATION			3
ITEM 1. FINANCIAL STATEMENTS			3
CONSOLIDATED BALANCE SHEETS (Unaudited)			3
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)			4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)			5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)			6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)			8
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			9
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			44


EXECUTIVE SUMMARY			47
RESULTS OF OPERATIONS			52
FINANCIAL CONDITION			67
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			78
ITEM 4. CONTROLS AND PROCEDURES			78
PART II – OTHER INFORMATION			79
ITEM 1. LEGAL PROCEEDINGS			79
ITEM 1A. RISK FACTORS			79
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES			80
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			81
ITEM 4. MINE SAFETY DISCLOSURES			81
ITEM 5. OTHER INFORMATION			81
ITEM 6. EXHIBITS			82
SIGNATURES			84

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	September 30, 2023		December 31, 2022

(Dollars in thousands)	(Unaudited)
Assets
Cash and cash equivalents:
Cash and balances due from banks	$	108,107	$	94,679
Interest-bearing deposits in other banks	191,002		59,343
Total cash and cash equivalents	299,109		154,022
Available-for-sale investment securities, at fair value (amortized cost of $1,211,794 at September 30, 2023 and $1,300,719 at December 31, 2022) (a)	1,018,581		1,131,399
Held-to-maturity investment securities, at amortized cost (fair value of $569,888 at September 30, 2023 and $478,509 at December 31, 2022) (a)	675,409		560,212
Other investment securities	66,332		51,609
Total investment securities (a)	1,760,322		1,743,220
Loans and leases, net of deferred fees and costs (b)	6,084,390		4,707,150
Allowance for credit losses	(62,924)		(53,162)
Net loans and leases (c)	6,021,466		4,653,988
Loans held for sale	2,699		2,140
Bank premises and equipment, net of accumulated depreciation	103,877		82,934
Bank owned life insurance	139,554		105,292
Goodwill	355,106		292,397
Other intangible assets	53,388		33,932
Other assets	207,013		139,379
Total assets	$	8,942,534	$	7,207,304
Liabilities
Deposits:
Non-interest-bearing	$	1,569,095	$	1,589,402
Interest-bearing	5,468,423		4,127,539
Total deposits	7,037,518		5,716,941
Short-term borrowings	585,437		500,138
Long-term borrowings	173,312		101,093

Accrued expenses and other liabilities	153,048		103,804
Total liabilities	7,949,315		6,421,976
Stockholders’ equity
Preferred shares, no par value, 50,000 shares authorized, no shares issued at September 30, 2023 or at December 31, 2022	—		—
Common shares, no par value, 50,000,000 shares authorized, 36,723,893 shares issued at September 30, 2023 and 29,857,920 shares issued at December 31, 2022, including at each date shares held in treasury	864,010		686,450
Retained earnings	307,534		265,936
Accumulated other comprehensive loss, net of deferred income taxes	(143,796)		(127,136)
Treasury stock, at cost, 1,412,650 shares at September 30, 2023 and 1,643,461 shares at December 31, 2022	(34,529)		(39,922)
Total stockholders’ equity	993,219		785,328
Total liabilities and stockholders’ equity	$	8,942,534	$	7,207,304

(a) Available-for-sale investment securities and held-to-maturity investment securities are presented net of allowance for credit losses of $0 and $238, respectively, at September 30, 2023, and $0 and $241, respectively, at December 31, 2022.

(b) Also referred to throughout this Quarterly Report on Form 10-Q as "total loans" and "loans held for investment."

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands, except per share data)	2023		2022		2023		2022
Interest income:
Interest and fees on loans and leases	$	109,024	$	61,370	$	272,634	$	168,334
Interest and dividends on taxable investment securities	12,635		7,559		36,409		20,576
Interest on tax-exempt investment securities	1,133		1,095		3,254		3,136
Other interest income	801		847		1,862		1,306
Total interest income	123,593		70,871		314,159		193,352
Interest expense:
Interest on deposits	22,482		2,316		42,546		6,383
Interest on short-term borrowings	5,169		393		14,940		992
Interest on long-term borrowings	2,668		1,111		5,668		3,148

Total interest expense	30,319		3,820		63,154		10,523
Net interest income	93,274		67,051		251,005		182,829
Provision for (recovery of) credit losses	4,053		1,776		13,889		(5,811)
Net interest income after provision for (recovery of) credit losses	89,221		65,275		237,116		188,640



Non-interest income:
Electronic banking income	6,466		5,261		18,375		15,933
Insurance income	4,250		3,618		13,679		11,995
Trust and investment income	4,288		3,954		12,786		12,476
Deposit account service charges	4,516		3,833		12,192		10,817
Lease (loss) income	(66)		1,725		2,730		2,931
Bank owned life insurance income	1,375		694		2,924		1,922
Mortgage banking income	237		328		740		1,116
Net loss on asset disposals and other transactions	(307)		(35)		(2,218)		(314)
Net (loss) gain on investment securities	(7)		21		(2,108)		107
Other non-interest income	2,452		967		4,179		2,819
Total non-interest income	23,204		20,366		63,279		59,802
Non-interest expense:
Salaries and employee benefit costs	36,608		28,618		106,661		83,932
Net occupancy and equipment expense	5,501		4,813		15,836		14,669
Professional fees	3,456		2,832		13,775		8,784
Data processing and software expense	6,288		3,279		15,578		9,228
Amortization of other intangible assets	3,280		2,023		7,951		5,765
Electronic banking expense	1,836		2,648		5,159		8,134
Marketing expense	1,267		1,136		3,554		2,991
Federal Deposit Insurance Corporation ("FDIC") insurance expense	1,260		709		3,525		2,921
Franchise tax expense	772		1,075		2,678		2,941
Communication expense	752		599		2,089		1,873
Other loan expenses	856		511		2,133		1,788
Other non-interest expense	9,820		4,010		19,859		10,755
Total non-interest expense	71,696		52,253		198,798		153,781
Income before income taxes	40,729		33,388		101,597		94,661
Income tax expense	8,847		7,410		22,059		20,218
Net income	$	31,882	$	25,978	$	79,538	$	74,443


Earnings per common share - basic	$	0.91	$	0.93	$	2.49	$	2.65
Earnings per common share - diluted	$	0.90	$	0.92	$	2.47	$	2.65
Weighted-average number of common shares outstanding - basic	34,818,346		27,865,416		31,771,061		27,929,720
Weighted-average number of common shares outstanding - diluted	35,061,897		27,973,255		31,977,486		28,009,263
Cash dividends declared	$	13,793	$	10,753	$	37,940	$	31,686
Cash dividends declared per common share	$	0.39	$	0.38	$	1.16	$	1.12

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2023		2022		2023		2022
Net income	$	31,882	$	25,978	$	79,538	$	74,443
Other comprehensive loss:
Available-for-sale investment securities:
Gross unrealized holding loss arising during the period	(34,330)		(57,911)		(26,002)		(172,195)
Related tax benefit	7,671		13,484		6,178		40,170
Reclassification adjustment for net loss (gain) included in net income	7		(21)		2,108		(107)
Related tax benefit (expense)	3		5		(492)		25


Net effect on other comprehensive loss	(26,649)		(44,443)		(18,208)		(132,107)
Defined benefit plan:
Net (loss) gain arising during the period	(244)		203		(244)		264
Related tax benefit (expense)	57		(48)		57		(62)
Amortization of unrecognized loss and service cost on benefit plans	—		23		9		61
Related tax benefit	—		(5)		(2)		(14)
Reclassification from accumulated other comprehensive income ("AOCI")	2,424		139		2,424		139
Related tax benefit	(566)		(32)		(566)		(32)
Net effect on other comprehensive loss	1,671		280		1,678		356
Cash flow hedges:
Net gain (loss) arising during the period	118		3,388		(165)		10,948
Related tax (expense) benefit	(16)		(789)		35		(2,501)
Net effect on other comprehensive loss	102		2,599		(130)		8,447
Total other comprehensive loss, net of tax	(24,876)		(41,564)		(16,660)		(123,304)
Total comprehensive income (loss)	$	7,006	$	(15,586)	$	62,878	$	(48,861)

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)


					Accumulated Other Comprehensive Loss				Total Stockholders' Equity
	Common Shares		Retained Earnings				Treasury Stock
(Dollars in thousands)
Balance, June 30, 2023	$	862,960	$	289,445	$	(118,920)	$	(34,578)	$	998,907

Net income	—		31,882		—		—		31,882
Other comprehensive loss, excluding pension termination settlement, net of tax	—		—		(26,734)		—		(26,734)
Pension termination settlement, net of tax					1,858				1,858


Cash dividends declared	—		(13,793)				—		(13,793)

Reissuance of treasury stock for common share awards	(314)		—		—		314		—


Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors	—		—		—		(391)		(391)

Common shares issued under dividend reinvestment plan	284		—		—		—		284
Common shares issued under compensation plan for Boards of Directors	6		—		—		133		139

Common shares issued under employee stock purchase plan	—		—		—		(7)		(7)
Stock-based compensation	1,074		—		—		—		1,074



Balance, September 30, 2023	$	864,010	$	307,534	$	(143,796)	$	(34,529)	$	993,219


					Accumulated Other Comprehensive Loss				Total Stockholders' Equity
	Common Shares		Retained Earnings				Treasury Stock
(Dollars in thousands)
Balance, December 31, 2022	$	686,450	$	265,936	$	(127,136)	$	(39,922)	$	785,328

Net income	—		79,538		—		—		79,538
Other comprehensive loss excluding pension termination settlement, net of tax	—		—		(18,518)		—		(18,518)
Pension termination settlement, net of tax					1,858				1,858


Cash dividends declared	—		(37,940)		—		—		(37,940)

Reissuance of treasury stock for common share awards	(5,724)		—		—		5,724		—

Reissuance of treasury stock for deferred compensation plan for Boards of Directors	—		—		—		115		115
Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors	—		—		—		(1,445)		(1,445)

Common shares issued under dividend reinvestment plan	1,036		—		—		—		1,036
Common shares issued under compensation plan for Boards of Directors	25		—		—		385		410

Common shares issued under employee stock purchase plan	61		—		—		614		675
Stock-based compensation	4,233		—		—		—		4,233

Issuance of common shares related to merger with Limestone Bancorp, Inc.	177,929		—		—		—		177,929

Balance, September 30, 2023	$	864,010	$	307,534	$	(143,796)	$	(34,529)	$	993,219

Table of Contents


					Accumulated Other Comprehensive Loss				Total Stockholders' Equity
	Common Shares		Retained Earnings				Treasury Stock
(Dollars in thousands)
Balance, June 30, 2022	$	684,416	$	234,608	$	(93,359)	$	(38,841)	$	786,824

Net income	—		25,978		—		—		25,978
Other comprehensive loss, net of tax	—		—		(41,564)		—		(41,564)


Cash dividends declared	—		(10,753)		—		—		(10,753)

Reissuance of treasury stock for common share awards	(219)		—		—		219		—


Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors	—		—		—		(235)		(235)
Common shares repurchased under share repurchase program then in effect	—		—		—		(1,168)		(1,168)
Common shares issued under dividend reinvestment plan	320		—		—		—		320
Common shares issued under compensation plan for Boards of Directors	20		—		—		106		126

Common shares issued under employee stock purchase plan	34		—		—		169		203
Stock-based compensation	780		—		—		—		780



Balance, September 30, 2022	$	685,351	$	249,833	$	(134,923)	$	(39,750)	$	760,511


					Accumulated Other Comprehensive Loss				Total Stockholders' Equity
	Common Shares		Retained Earnings				Treasury Stock
(Dollars in thousands)
Balance, December 31, 2021	$	686,282	$	207,076	$	(11,619)	$	(36,714)	$	845,025

Net income	—		74,443		—		—		74,443
Other comprehensive loss, net of tax	—		—		(123,304)		—		(123,304)


Cash dividends declared	—		(31,686)		—		—		(31,686)

Reissuance of treasury stock for common share awards	(4,944)		—		—		4,944		—

Reissuance of treasury stock for deferred compensation plan for Boards of Directors	—		—		—		78		78
Repurchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors	—		—		—		(1,671)		(1,671)
Common shares repurchased under share repurchase program then in effect	—		—		—		(7,155)		(7,155)
Common shares issued under dividend reinvestment plan	921		—		—		—		921
Common shares issued under compensation plan for Boards of Directors	64		—		—		314		378

Common shares issued under employee stock purchase plan	95		—		—		454		549
Stock-based compensation	2,933		—		—		—		2,933



Balance, September 30, 2022	$	685,351	$	249,833	$	(134,923)	$	(39,750)	$	760,511

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine Months Ended
	September 30,
(Dollars in thousands)	2023		2022
Net cash provided by operating activities	$	113,085	$	102,500
Investing activities:
Available-for-sale investment securities:
Purchases	(33,380)		(237,930)
Proceeds from sales	166,919		8,730
Proceeds from principal payments, calls and prepayments	115,963		155,070
Held-to-maturity investment securities:
Purchases	(187,487)		(51,060)
Proceeds from principal payments	72,396		16,080
Other investment securities:
Purchases	(24,768)		(11,110)
Proceeds from sales	15,681		5,885

Net (increase) decrease in loans held for investment	(285,202)		36,158
Net expenditures for premises and equipment	(10,620)		(7,008)
Proceeds from sales of other real estate owned	129		572
Purchase of bank owned life insurance	—		(30,000)
Proceeds from bank owned life insurance contracts	—		689
Business acquisitions, net of cash received (paid)	92,952		(85,791)
Investment in limited partnership and tax credit funds	(1,699)		(1,857)
Net cash used in investing activities	(79,116)		(201,572)
Financing activities:
Net decrease in non-interest-bearing deposits	(283,034)		(5,469)
Net increase in interest-bearing deposits	369,629		8,919
Net increase (decrease) in short-term borrowings	25,299		(37,916)
Proceeds from long-term borrowings	70,085		19,001
Payments on long-term borrowings	(32,515)		(116,354)


Cash dividends paid	(37,899)		(31,704)
Purchase of treasury stock under share repurchase program	—		(7,155)
Purchase of treasury stock in connection with employee incentive program and compensation plan for Boards of Directors to be held as treasury stock	(1,445)		(1,671)
Proceeds from issuance of common shares	998		878


Net cash provided by (used in) financing activities	111,118		(171,471)
Net increase (decrease) in cash and cash equivalents	145,087		(270,543)
Cash and cash equivalents at beginning of period	154,022		415,727
Cash and cash equivalents at end of period	$	299,109	$	145,184

Supplemental cash flow information:
Interest paid	$	57,033	$	11,006
Income taxes paid	29,636		1,947
Supplemental noncash disclosures:
Transfers from total loans to other real estate owned	31		55
Noncash recognition of new leases	4,428		27

See Notes to the Unaudited Condensed Consolidated Financial Statements

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PEOPLES BANCORP INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Summary of Significant Accounting Policies

Basis of Presentation: The accompanying Unaudited Condensed Consolidated Financial Statements of Peoples Bancorp Inc. and its subsidiaries ("Peoples" refers to Peoples Bancorp Inc. and its consolidated subsidiaries collectively, except where the context indicates the reference relates solely to Peoples Bancorp Inc.) have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not contain all of the information and footnotes required by US GAAP for annual financial statements and should be read in conjunction with Peoples’ Annual Report on Form 10-K for the fiscal year ended December 31, 2022 ("Peoples' 2022 Form 10-K").

The accounting and reporting policies followed in the presentation of the accompanying Unaudited Condensed Consolidated Financial Statements are consistent with those described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2022 Form 10-K, as updated by the information contained in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 (this "Form 10-Q"). Management has evaluated all significant events and transactions that occurred after September 30, 2023 for potential recognition or disclosure in these Unaudited Condensed Consolidated Financial Statements. In the opinion of management, these Unaudited Condensed Consolidated Financial Statements reflect all adjustments necessary to present fairly such information for the periods and at the dates indicated. Such adjustments are normal and recurring in nature. Intercompany accounts and transactions have been eliminated. The Consolidated Balance Sheet at December 31, 2022, contained herein, has been derived from the audited Consolidated Balance Sheet included in Peoples’ 2022 Form 10-K.

The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year, due in part to seasonal variations and unusual or infrequently occurring items.

New Accounting Pronouncements: From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies that are adopted by Peoples as of the required effective dates. The following paragraphs related to new pronouncements should be read in conjunction with "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples’ 2022 Form 10-K. Unless otherwise discussed, management believes the impact of any recently issued standards, including those issued but not yet effective, will not have a material impact on Peoples' financial statements taken as a whole.

Accounting Standards Update ("ASU") 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This guidance was further updated by ASU 2021-01. This update was effective from March 12, 2020 through December 31, 2022. The FASB further updated the guidance with ASU 2022-06, which deferred the sunset date of ASC Topic 848, Reference Rate Reform (Topic 848) from December 31, 2022 to December 31, 2024. ASU 2020-04 was early adopted by Peoples as of September 30, 2021, which reduced the accounting burden of assessing contracts impacted by reference rate reform. Peoples established a working group, consisting of key stakeholders from throughout the company, to monitor developments relating to London Inter-Bank Offered Rate ("LIBOR") changes and to guide the transition. This team has worked to successfully ensure that technology systems are prepared for the transition, loan documents that reference LIBOR-based rates have been appropriately amended to reference other methods of interest rate determinations and internal and external stakeholders have been apprised of the transition. Peoples ceased originating LIBOR-based products after December 31, 2021 and began originating SOFR-indexed products. Any LIBOR-based products originated prior to December 31, 2021, but maturing after June 30, 2023, have been amended to reference SOFR-indexed rates as of July 1, 2023. The transition did not have a material impact on Peoples' consolidated financial statements.

ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings ("TDRs") and Vintage Disclosures. This ASU eliminates the accounting guidance on TDRs for creditors and amends the guidance on disclosures to include current-period gross charge-offs by year of origination. This ASU also updates the requirements related to accounting for credit losses under Accounting Standards Codification ("ASC") 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. For entities that have already adopted ASU 2016-13, as Peoples has, the amendments in ASU 2022-02 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Effective January 1, 2023, Peoples adopted the amendments within ASU 2022-02, using the prospective transition method. The adoption of this guidance did not have a material impact on Peoples' consolidated financial statements.

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Pursuant to the guidance in ASU 2022-02, when a loan is restructured, Peoples continues to measure the allowance for credit losses on the loan using a discounted cash flow approach that utilizes a prepayment-adjusted discount rate based on the loan’s restructured terms. Under the TDR accounting model, Peoples modeled a 12-month extension of the contractual terms for TDRs that were to mature within the next 12 months. As Peoples has elected a prospective transition, the extension on a loan that was previously restructured and accounted for as a TDR will continue to be measured as it had been historically in Peoples' allowance for credit losses until the loan is paid off, sold, liquidated or subsequently restructured. Refer to "Note 4 Loans and Leases" for additional information.

Note 2 Fair Value of Assets and Liabilities

Fair value represents the amount expected to be received to sell an asset or paid to transfer a liability in its principal or most advantageous market in an orderly transaction between market participants at the measurement date. In accordance with fair value accounting guidance, Peoples measures, records and reports various types of assets and liabilities at fair value on either a recurring or a non-recurring basis in the Unaudited Condensed Consolidated Financial Statements. Those assets and liabilities are presented below in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis.”

Depending on the nature of the asset or the liability, Peoples uses various valuation methodologies and assumptions to estimate fair value. The measurement of fair value under US GAAP uses a hierarchy, which is described in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2022 Form 10-K.

Assets and liabilities are assigned to a level within the fair value hierarchy based on the lowest level of significant input used to measure fair value. Assets and liabilities may change levels within the fair value hierarchy due to market conditions or other circumstances. Those transfers are recognized on the date of the event that prompted the transfer. There were no transfers of assets or liabilities required to be measured at fair value on a recurring basis between levels of the fair value hierarchy during the periods presented.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

The following table provides the fair value for assets and liabilities required to be measured and reported at fair value on a recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy.


	Recurring Fair Value Measurements at Reporting Date
	September 30, 2023						December 31, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Assets:
Available-for-sale investment securities:
Obligations of:
U.S. Treasury and government agencies	$	42,466	$	—	$	—	$	152,422	$	—	$	—
U.S. government sponsored agencies	—		103,932		—		—		88,115		—
States and political subdivisions	—		220,460		—		—		225,882		—
Residential mortgage-backed securities	—		593,104		—		—		604,653		—
Commercial mortgage-backed securities	—		50,840		—		—		50,049		—
Bank-issued trust preferred securities	—		5,927		1,852		—		10,278		—

Total available-for-sale securities	$	42,466	$	974,263	$	1,852	$	152,422	$	978,977	$	—
Equity investment securities (a)	155		239		—		147		199		—
Derivative assets (b)	—		34,709		—		—		34,123		—
Liabilities:
Derivative liabilities (c)	$	—	$	29,491	$	—	$	—	$	28,529	$	—

(a) Included in "Other investment securities" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

(b) Included in "Other assets" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

(c) Included in "Accrued expenses and other liabilities" on the Unaudited Consolidated Balance Sheets. For additional information, see "Note 10 Derivative Financial Instruments" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Available-for-Sale Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent either quoted market prices for the identical securities (Level 1) or fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, SOFR (or other relevant) yield curves, credit spreads and prices from market makers and live trading systems (Level 2). As of September 30, 2023, Peoples had one

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available-for-sale investment security for which quoted market prices or observable market data was unavailable. Therefore, a broker estimated market value based on the price an interested buyer would be willing to pay was used to estimate the fair value (Level 3). Management reviews the valuation methodology and quality controls utilized by the pricing services or broker in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.

Equity Investment Securities: The fair values of Peoples' equity investment securities are obtained from quoted prices in active exchange markets for identical assets or liabilities (Level 1) or quoted prices in less active markets (Level 2).

Derivative Assets and Derivative Liabilities: Derivative assets and derivative liabilities are recognized on the Unaudited Consolidated Balance Sheets at their fair value within "Other assets" and "Accrued expenses and other liabilities", respectively. The fair value for derivative financial instruments is determined based on market prices, broker-dealer quotations on similar products, or other related input parameters (Level 2).

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis

The following table provides the fair value for each class of assets and liabilities required to be measured and reported at fair value on a non-recurring basis on the Unaudited Consolidated Balance Sheets by level in the fair value hierarchy at September 30, 2023 and December 31, 2022.


	Non-Recurring Fair Value Measurements at Reporting Date
	September 30, 2023				December 31, 2022
(Dollars in thousands)	Level 2		Level 3		Level 2		Level 3

Assets:
Collateral dependent loans	$	—	$	508	$	—	$	10,354
Loans held for sale (a)	$	1,443	$	—	$	1,254	$	—
Other real estate owned	$	—	$	32	$	—	$	55

(a) Loans held for sale are presented gross of a valuation allowance of $237 and $105 at September 30, 2023 and at December 31, 2022, respectively.

Collateral Dependent Loans: Loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty, are considered collateral dependent. Peoples utilizes outside third-party appraisal services to value the underlying collateral, which Peoples then uses to report the loans at their fair value (Level 3).

Loans Held for Sale: Loans originated and intended to be sold in the secondary market, generally one-to-four family residential loans, are carried, in aggregate, at the lower of cost or estimated fair value. Peoples uses a valuation model using quoted market prices of similar instruments in arriving at the fair value (Level 2).

Other Real Estate Owned ("OREO"): OREO, included in "Other assets" on the Unaudited Consolidated Balance Sheets, is comprised primarily of commercial and residential real estate properties acquired by Peoples in satisfaction of a loan. OREO obtained in satisfaction of a loan is recorded at the lower of cost or estimated fair value, less estimated costs to sell the property. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches, including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available (Level 3).

Servicing Rights: Servicing rights are included in "Other intangible assets" on the Unaudited Consolidated Balance Sheets. The fair value of servicing rights is determined by using a discounted cash flow model, which estimates the present value of the future net cash flows of the servicing portfolio based on various factors, such as servicing costs, expected prepayment speeds and discount rates (Level 3). The carrying value of servicing rights is not re-measured to fair value on a recurring basis. Peoples assesses the carrying value of servicing rights quarterly for impairment.

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Financial Instruments Not Required to be Measured or Reported at Fair Value

The following table provides the carrying amount for each class of assets and liabilities and the fair value for certain financial instruments that are not required to be measured or reported at fair value on the Unaudited Consolidated Balance Sheets.


	Fair Value Measurements of Other Financial Instruments
(Dollars in thousands)	Fair Value Hierarchy Level	September 30, 2023				December 31, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value

Assets:
Cash and cash equivalents	1	$	299,109	$	299,109	$	154,022	$	154,022




Held-to-maturity investment securities:
Obligations of:
U.S. government sponsored agencies	2	174,699		160,985		132,366		123,020
States and political subdivisions (a)	2	144,728		104,810		145,263		108,776
Residential mortgage-backed securities	2	248,627		218,970		176,215		157,998
Commercial mortgage-backed securities	2	102,845		85,123		101,861		85,354
Commercial mortgage-backed securities	3	4,748		—		4,748		3,361
Total held-to-maturity securities		675,647		569,888		560,453		478,509


Other investment securities:
Other investment securities at cost:
Federal Home Loan Bank ("FHLB") stock	N/A	33,808		33,808		26,605		26,605
Federal Reserve Bank ("FRB") stock	N/A	26,897		26,897		21,231		21,231
Banker's Bank of Kentucky ("BBKY") stock	N/A	445		445		355		355
Total other investment securities at cost		61,150		61,150		48,191		48,191
Other investment securities at fair value:
Nonqualified deferred compensation (b)	1	2,744		2,744		2,048		2,048
Other investment securities (c)	2	2,044		2,044		1,024		1,024
Total other investment securities		65,938		65,938		51,263		51,263

Loans and leases, net of deferred fees and costs (d)	3	6,084,390		5,808,484		4,707,150		4,516,695
Bank owned life insurance	2	139,554		139,554		105,292		105,292
Liabilities:
Deposits	2	$	7,037,518	$	5,992,880	$	5,716,941	$	4,682,491
Short-term borrowings	2	585,437		595,045		500,138		504,584
Long-term borrowings	2	173,312		176,156		101,093		101,992

(a) Held-to-maturity investment securities are presented gross of an allowance for credit losses of $238 and $241 at September 30, 2023 and December 31, 2022, respectively.

(b) Nonqualified deferred compensation includes mutual funds as part of the investment.

(c) "Other investment securities", as reported on the Unaudited Consolidated Balance Sheets, also included equity investment securities at September 30, 2023

and at December 31, 2022, which are reported in the Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

table above and not included in this table.

(d) Loans and leases, net of deferred fees and costs, are presented gross of an allowance for credit losses of $62.9 million and $53.2 million at September 30, 2023 and at December 31, 2022, respectively.

For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument. These financial instruments include cash and cash equivalents, and overnight borrowings. Peoples used the following methods and assumptions in estimating the fair value of the following financial instruments:

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, balances due from other banks, interest-bearing deposits in other banks, federal funds sold and other short-term investments with original maturities of ninety days or less. The carrying amount for cash and cash equivalents balances are a reasonable estimate of fair value (Level 1).

Held-to-Maturity Investment Securities: The fair values used by Peoples are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems (Level 2). When observable market data is absent, the independent pricing service estimates prices based on

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underlying cash flow characteristics and discount rates and compares them to similar securities (Level 3). Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided, and challenges prices when management believes a material discrepancy in pricing exists.

Other Investment Securities: Other investment securities at cost are not recorded at fair value as they are not marketable securities. Other investment securities at fair value are valued using quoted prices in an active market (Level 1) or quoted prices in less active markets (Level 2).

Loans and Leases, Net of Deferred Fees and Costs: The fair value of portfolio loans and leases assumes sale of the underlying notes to a third-party financial investor. Accordingly, this value is not necessarily the value to Peoples if the notes were held to maturity. Peoples considers interest rate, credit and market factors in estimating the fair value of loans and leases (Level 3). Fair values for loans and leases are estimated using a discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans and leases with similar terms, the credit risk associated with the loans and leases and other market factors, including liquidity.

Bank Owned Life Insurance: Peoples' bank owned life insurance policies are recorded at their cash surrender value (Level 2). Peoples recognizes tax-exempt income from the periodic increases in the cash surrender value of these policies and from death benefits.

Deposits: The fair value of fixed-maturity certificates of deposit ("CDs") is estimated using a discounted cash flow calculation based on current rates offered for deposits of similar remaining maturities. Demand and other non-fixed-maturity deposits are estimated using a discounted cash flow calculation based on maturity, attrition and re-pricing assumptions (Level 2).

Short-term Borrowings: The fair value of short-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2).

Long-term Borrowings: The fair value of long-term borrowings is estimated using a discounted cash flow analysis based on rates currently available to Peoples for borrowings with similar terms (Level 2).

Certain financial assets and financial liabilities that are not required to be measured or reported at fair value can be subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). These financial assets and financial liabilities include the following: customer relationships, the deposit base, and other information required to compute Peoples’ aggregate fair value, which are not included in the above information. Accordingly, the fair values described above are not intended to represent the aggregate fair value of Peoples.

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Note 3 Investment Securities

Available-for-sale

The following table summarizes Peoples' available-for-sale investment securities:


(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2023
Obligations of:
U.S. Treasury and government agencies	$	45,207	$	—	$	(2,741)	$	42,466
U.S. government sponsored agencies	118,148		—		(14,216)		103,932
States and political subdivisions	263,001		6		(42,547)		220,460
Residential mortgage-backed securities	714,501		725		(122,122)		593,104
Commercial mortgage-backed securities	62,584		—		(11,744)		50,840
Bank-issued trust preferred securities	8,353		1		(575)		7,779

Total available-for-sale securities	$	1,211,794	$	732	$	(193,945)	$	1,018,581
December 31, 2022
Obligations of:
U.S. Treasury and government agencies	$	158,473	$	—	$	(6,051)	$	152,422
U.S. government sponsored agencies	101,753		18		(13,656)		88,115
States and political subdivisions	261,612		12		(35,742)		225,882
Residential mortgage-backed securities	707,025		1,017		(103,389)		604,653
Commercial mortgage-backed securities	61,091		—		(11,042)		50,049
Bank-issued trust preferred securities	10,765		57		(544)		10,278

Total available-for-sale securities	$	1,300,719	$	1,104	$	(170,424)	$	1,131,399

The gross gains and losses realized by Peoples from sales of available-for-sale securities for the periods ended September 30 were as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2023		2022		2023		2022
Gross gains realized	$	1,101	$	29	$	1,191	$	189
Gross losses realized	(1,108)		(8)		(3,299)		(82)
Net (loss) gain realized	$	(7)	$	21	$	(2,108)	$	107

The cost of investment securities sold, and any resulting gain or loss, were based on the specific identification method and recognized as of the trade date.

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The following table presents a summary of available-for-sale investment securities that have been in a continuous unrealized loss position for the periods identified:


	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss
September 30, 2023
Obligations of:
U.S. Treasury and government agencies	$	15,992	$	374	19	$	26,476	$	2,367	12	$	42,468	$	2,741
U.S. government sponsored agencies	29,514		450		17	74,418		13,766		17	103,932		14,216
States and political subdivisions	47,093		3,358		106	170,282		39,189		156	217,375		42,547
Residential mortgage-backed securities	68,958		4,928		85	519,488		117,194		238	588,446		122,122
Commercial mortgage-backed securities	7,851		344		9	42,767		11,400		21	50,618		11,744
Bank-issued trust preferred securities	—		—		—	3,925		575		2	3,925		575

Total	$	169,408	$	9,454	236	$	837,356	$	184,491	446	$	1,006,764	$	193,945
December 31, 2022
Obligations of:
U.S. Treasury and government agencies	$	112,730	$	2,772	13	$	39,692	$	3,279	11	$	152,422	$	6,051
U.S. government sponsored agencies	15,166		249		17	66,706		13,407		18	81,872		13,656
States and political subdivisions	60,324		714		114	156,900		35,028		117	217,224		35,742
Residential mortgage-backed securities	104,959		8,087		105	488,452		95,302		139	593,411		103,389
Commercial mortgage-backed securities	1,874		129		2	48,175		10,913		21	50,049		11,042
Bank-issued trust preferred securities	4,400		100		3	3,556		444		2	7,956		544

Total	$	299,453	$	12,051	254	$	803,481	$	158,373	308	$	1,102,934	$	170,424

Management evaluates available-for-sale investment securities for an allowance for credit losses on a quarterly basis. At September 30, 2023, management concluded that no individual securities at an unrealized loss position required an allowance for credit losses. At September 30, 2023, Peoples did not have the intent to sell, nor was it more likely than not that Peoples would be required to sell, any of the securities with an unrealized loss prior to recovery. Further, the unrealized losses at both September 30, 2023 and December 31, 2022 were largely attributable to changes in market interest rates and spreads since the securities were purchased, and were not credit-related losses. Accrued interest receivable is not included in investment securities balances, and is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Interest receivable on investment securities was $9.4 million at September 30, 2023 and $7.8 million at December 31, 2022.

At September 30, 2023, approximately 99% of the mortgage-backed securities with a market value that had been at an unrealized loss position for twelve months or more were issued by U.S. government sponsored agencies. The remaining 1%, or five positions, consisted of privately issued mortgage-backed securities with all of the underlying mortgages originated prior to 2004. Of the five positions, no positions had a fair value of less than 90% of their book values. Management analyzed the underlying credit quality of these mortgage-backed securities and concluded the unrealized losses were primarily attributable to the floating rate nature of these investments and the low remaining number of loans underlying these securities. Obligations of the U.S. treasury and government agencies, obligations of U.S. government sponsored agencies, and obligations of states and political subdivisions were issued by the U.S. Treasury Department or other U.S., state or local government agencies or government-sponsored entities. The decline in fair values was attributable to changes in interest rates and not credit quality. Therefore, management does not consider these to be impaired securities.

The unrealized loss with respect to the two bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at September 30, 2023 was attributable to the subordinated nature of the trust preferred securities.

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The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by contractual maturity at September 30, 2023. The weighted-average yields are based on the amortized cost. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date.


(Dollars in thousands)	Within 1 Year			1 to 5 Years			5 to 10 Years			Over 10 Years			Total
Amortized cost
Obligations of:
U.S. Treasury and government agencies	$	—		$	30,703		$	8,439		$	6,065		$	45,207
U.S. government sponsored agencies	7,929			60,184			32,335			17,700			118,148
States and political subdivisions	18,785			52,478			66,632			125,106			263,001
Residential mortgage-backed securities	1			4,052			61,904			648,544			714,501
Commercial mortgage-backed securities	1,628			12,583			27,254			21,119			62,584
Bank-issued trust preferred securities	—			3,000			3,500			1,853			8,353

Total available-for-sale securities	$	28,343		$	163,000		$	200,064		$	820,387		$	1,211,794
Fair value
Obligations of:
U.S. Treasury and government agencies	$	—		$	28,284		$	8,242		$	5,940		$	42,466
U.S. government sponsored agencies	7,858			54,328			26,545			15,201			103,932
States and political subdivisions	18,554			48,537			54,148			99,221			220,460
Residential mortgage-backed securities	1			3,845			54,760			534,498			593,104
Commercial mortgage-backed securities	1,621			11,195			21,986			16,038			50,840
Bank-issued trust preferred securities	—			2,942			2,984			1,853			7,779

Total available-for-sale securities	$	28,034		$	149,131		$	168,665		$	672,751		$	1,018,581
Total weighted-average yield	2.77		%	2.27		%	2.10		%	2.29		%	2.27		%

Held-to-maturity

The following table summarizes Peoples’ held-to-maturity investment securities:


(Dollars in thousands)	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2023
Obligations of:
U.S. government sponsored agencies	$	174,699	$	—	$	—	$	(13,714)	$	160,985
States and political subdivisions	144,728		(238)		84		(39,764)		104,810
Residential mortgage-backed securities	248,627		—		85		(29,742)		218,970
Commercial mortgage-backed securities	107,593		—		—		(22,470)		85,123
Total held-to-maturity securities	$	675,647	$	(238)	$	169	$	(105,690)	$	569,888
December 31, 2022
Obligations of:
U.S. government sponsored agencies	$	132,366	$	—	$	130	$	(9,476)	$	123,020
States and political subdivisions	145,263		(241)		162		(36,408)		108,776
Residential mortgage-backed securities	176,215		—		244		(18,461)		157,998
Commercial mortgage-backed securities	106,609		—		—		(17,894)		88,715
Total held-to-maturity securities	$	560,453	$	(241)	$	536	$	(82,239)	$	478,509

There were no sales of held-to-maturity securities during either of the nine months ended September 30, 2023 or 2022.

Management evaluates held-to-maturity investment securities for an allowance for credit losses on a quarterly basis. Peoples has determined that the loss given default for U.S. government sponsored agencies investment securities is zero, due to the fact that it is unlikely the ultimate guarantor (the U.S. government) would not perform on its implicit guarantee in the event of default. The remaining securities are included in the calculation of the allowance for credit losses for held-to-maturity investment securities. Peoples reported $0.2 million of allowance for credit losses for held-to-maturity securities at both September 30, 2023, and December 31, 2022.

The following table presents a summary of held-to-maturity investment securities that had been in a continuous unrealized loss position for the periods identified:

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	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss
September 30, 2023
Obligations of:
U.S. government sponsored agencies	$	111,592	$	3,708	22	49,393		10,006		16	$	160,985	$	13,714
States and political subdivisions	—		—		—	101,560		39,764		67	101,560		39,764
Residential mortgage-backed securities	130,966		9,176		38	80,612		20,566		26	211,578		29,742
Commercial mortgage-backed securities	21,396		3,599		8	63,727		18,871		30	85,123		22,470
Total	$	263,954	$	16,483	68	$	295,292	$	89,207	139	$	559,246	$	105,690
December 31, 2022
Obligations of:
U.S. government sponsored agencies	$	59,905	$	651	17	29,306		8,825		9	$	89,211	$	9,476
States and political subdivisions	3,590		1,072		3	101,863		35,336		64	105,453		36,408
Residential mortgage-backed securities	71,582		2,904		21	72,862		15,557		18	144,444		18,461
Commercial mortgage-backed securities	26,869		650		8	61,846		17,244		29	88,715		17,894
Total	$	161,946	$	5,277	49	$	265,877	$	76,962	120	$	427,823	$	82,239

The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity securities by contractual maturity at September 30, 2023. The weighted-average yields are based on the amortized cost and are computed on a fully taxable-equivalent basis using a blended federal and state corporate income tax rate of 23.3% at September 30, 2023. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date.


(Dollars in thousands)	Within 1 Year			1 to 5 Years			5 to 10 Years			Over 10 Years			Total
Amortized cost
Obligations of:
U.S. government sponsored agencies	4,629			$	18,660		$	67,032		$	84,378		$	174,699
States and political subdivisions	—			5,218			9,392			130,118			144,728
Residential mortgage-backed securities	—			646			4,453			243,528			248,627
Commercial mortgage-backed securities	6,562			9,466			37,564			54,001			107,593
Total held-to-maturity securities	$	11,191		$	33,990		$	118,441		$	512,025		$	675,647
Fair value
Obligations of:
U.S. government sponsored agencies	4,584			$	17,800		$	65,196		$	73,405		$	160,985
States and political subdivisions	—			5,157			7,706			91,947			104,810
Residential mortgage-backed securities	—			626			3,736			214,608			218,970
Commercial mortgage-backed securities	6,474			7,793			30,487			40,369			85,123
Total held-to-maturity securities	$	11,058		$	31,376		$	107,125		$	420,329		$	569,888
Total weighted-average yield	2.32		%	1.64		%	4.04		%	3.43		%	3.43		%

Other Investment Securities

Peoples' other investment securities on the Unaudited Consolidated Balance Sheets consist largely of shares of FHLB stock and of FRB stock.

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The following table summarizes the carrying value of Peoples' other investment securities:


(Dollars in thousands)	September 30, 2023		December 31, 2022
FHLB stock	$	33,808	$	26,605
FRB stock	26,897		21,231
Nonqualified deferred compensation	2,744		2,048
Equity investment securities	394		346
Other investment securities	2,489		1,379
Total other investment securities	$	66,332	$	51,609

During the nine months ended September 30, 2023, Peoples redeemed $15.6 million of FHLB stock in order to be in compliance with the requirements of the FHLB. Peoples purchased $17.2 million of additional FHLB stock during the nine months ended September 30, 2023, as a result of the FHLB's capital requirements on FHLB advances during the first nine months.

For the three months ended September 30, 2023 and 2022, Peoples recorded the change in the fair value of equity investment securities held during the period, in "Other non-interest income", resulting in an unrealized loss of $58,000 and an unrealized gain of $6,000, respectively. For the nine months ended September 30, 2023 and 2022, Peoples recognized an unrealized loss of $175,000 and an unrealized loss of $12,000, respectively, for the change in fair value of equity investment securities in "Other non-interest income".

At September 30, 2023, Peoples' investment in equity investment securities was comprised largely of common stocks issued by various unrelated bank holding companies. There were no equity investment securities of a single issuer that exceeded 10% of Peoples' stockholders' equity at September 30, 2023.

Pledged Securities

Peoples has pledged available-for-sale investment securities and held-to-maturity investment securities to secure public and trust department deposits, and repurchase agreements in accordance with federal and state requirements. Peoples has also pledged available-for-sale investment securities to secure additional borrowing capacity at the FHLB and the FRB.

The following table summarizes the carrying amount of Peoples' pledged securities:


	Carrying Amount
(Dollars in thousands)	September 30, 2023		December 31, 2022

Securing public and trust department deposits, and repurchase agreements:
Available-for-sale	$	745,164	$	779,244
Held-to-maturity	523,317		312,921



Securing additional borrowing capacity at the FHLB and the FRB:
Available-for-sale	3,520		3,972
Held-to-maturity	1,254		128,870

Note 4 Loans and Leases

Peoples' loan portfolio consists of various types of loans and leases originated primarily as a result of lending opportunities within Peoples' footprint. Peoples also originates insurance premium finance loans nationwide through its Peoples Premium Finance division, and originates leases nationwide through its North Star Leasing ("NSL") division and its Vantage Financial, LLC ("Vantage") subsidiary. Throughout this Form 10-Q, loans and leases are referred to as "total loans" and "loans held for investment".

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The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows:


(Dollars in thousands)	September 30, 2023		December 31, 2022
Construction	$	374,016	$	246,941
Commercial real estate, other	2,189,984		1,423,518
Commercial and industrial	1,128,809		892,634
Premium finance	189,251		159,197
Leases	402,635		345,131
Residential real estate	791,965		723,360
Home equity lines of credit	203,940		177,858
Consumer, indirect	668,371		629,426
Consumer, direct	134,562		108,363
Deposit account overdrafts	857		722
Total loans, at amortized cost	$	6,084,390	$	4,707,150

Accrued interest receivable is not included within the loan balances, but is presented in the “Other assets” line of the Unaudited Consolidated Balance Sheets, with no recorded allowance for credit losses. Total interest receivable on loans was $22.2 million at September 30, 2023 and $15.4 million at December 31, 2022.

Nonaccrual and Past Due Loans

A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due.

The amortized cost of loans on nonaccrual status and of loans delinquent for 90 days or more and accruing was as follows:


	September 30, 2023				December 31, 2022
(Dollars in thousands)	Nonaccrual (a)		Accruing Loans 90+ Days Past Due		Nonaccrual (a)		Accruing Loans 90+ Days Past Due
Construction	$	—	$	—	$	12	$	—
Commercial real estate, other	3,661		487		12,121		167
Commercial and industrial	3,116		67		3,462		130
Premium finance	—		1,581		—		504
Leases	7,929		6,007		3,178		3,041
Residential real estate	8,454		736		9,496		917
Home equity lines of credit	1,026		177		820		58
Consumer, indirect	1,904		47		2,176		—
Consumer, direct	97		15		208		25
Total loans, at amortized cost	$	26,187	$	9,117	$	31,473	$	4,842

(a) There were $0.5 million of nonaccrual loans for which there was no allowance for credit losses at September 30, 2023 and $1.4 million of nonaccrual loans for which there was no allowance for credit losses at December 31, 2022.

During the first nine months of 2023, nonaccrual loans declined compared to at December 31, 2022, which was primarily due to three large relationships totaling $8.0 million of commercial real estate loans which were paid off in the third quarter. This was partially offset by an increase in nonaccrual leases during the first nine months of 2023. The increase in accruing loans 90+ days past due at September 30, 2023 when compared to at December 31, 2022, was primarily due to increases of approximately $3.0 million and $1.1 million in leases and premium finance loans, respectively.

The amount of interest income recognized on accruing loans 90+ days past due during the nine months ended September 30, 2023 was $0.9 million.

The following table presents the aging of the amortized cost of past due loans:

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	Loans Past Due								Current Loans		Total Loans
(Dollars in thousands)	30 - 59 days		60 - 89 days		90 + Days		Total
September 30, 2023
Construction	$	—	$	—	$	—	$	—	$	374,016	$	374,016
Commercial real estate, other	1,059		322		2,970		4,351		2,185,633		2,189,984
Commercial and industrial	733		2,513		3,171		6,417		1,122,392		1,128,809
Premium finance	781		686		1,581		3,048		186,203		189,251
Leases	4,057		9,036		13,937		27,030		375,605		402,635
Residential real estate	3,286		2,924		4,091		10,301		781,664		791,965
Home equity lines of credit	1,637		239		795		2,671		201,269		203,940
Consumer, indirect	5,663		1,090		816		7,569		660,802		668,371
Consumer, direct	441		96		53		590		133,972		134,562
Deposit account overdrafts	—		—		—		—		857		857
Total loans, at amortized cost	$	17,657	$	16,906	$	27,414	$	61,977	$	6,022,413	$	6,084,390
December 31, 2022
Construction	$	196	$	161	$	9	$	366	$	246,575	$	246,941
Commercial real estate, other	2,279		1,051		10,370		13,700		1,409,818		1,423,518
Commercial and industrial	2,522		289		3,449		6,260		886,374		892,634
Premium finance	646		816		504		1,966		157,231		159,197
Leases	6,074		1,921		6,218		14,213		330,918		345,131
Residential real estate	10,113		2,128		5,519		17,760		705,600		723,360
Home equity lines of credit	987		149		552		1,688		176,170		177,858
Consumer, indirect	5,866		1,048		921		7,835		621,591		629,426
Consumer, direct	703		70		108		881		107,482		108,363
Deposit account overdrafts	—		—		—		—		722		722
Total loans, at amortized cost	$	29,386	$	7,633	$	27,650	$	64,669	$	4,642,481	$	4,707,150

Delinquency trends improved slightly, as 99.0% of Peoples' loan portfolio was considered “current” at September 30, 2023, compared to 98.6% at December 31, 2022.

Pledged Loans

Peoples has pledged certain loans secured by one-to-four family and multifamily residential mortgages, home equity lines of credit and commercial real estate loans under a blanket collateral agreement to secure borrowings from the FHLB. Peoples also has pledged eligible commercial and industrial loans to secure borrowings with the FRB. Loans pledged are summarized as follows:


(Dollars in thousands)	September 30, 2023		December 31, 2022
Loans pledged to FHLB	$	1,245,235	$	783,843
Loans pledged to FRB	366,754		339,005

Credit Quality Indicators

As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2022 Form 10-K, Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. Loan grades are assigned at the time a new loan or lending commitment is extended by Peoples and may be changed at any time when circumstances warrant. Commercial loans to borrowers with an aggregate unpaid principal balance in excess of $1.0 million are reviewed at least on an annual basis for possible credit deterioration. Commercial leases, as well as loan relationships whose aggregate credit exposure to Peoples is equal to or less than $1.0 million, are reviewed on an event driven basis. Triggers for review include knowledge of adverse events affecting the borrower's business, receipt of financial statements indicating deteriorating credit quality or other similar events. Adversely classified loans are reviewed on a quarterly basis. A description of the general characteristics of the risk grades used by Peoples, follows:

“Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist.

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“Special Mention” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned.” Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on a secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position.

“Substandard” (grade 6): Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loans. They are characterized by the distinct possibility that Peoples will sustain some loss if the weaknesses are not corrected.

“Doubtful” (grade 7): Loans in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of each of these loans as an estimated loss is deferred until its more exact status may be determined.

“Loss” (grade 8): Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean a loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for credit losses are taken during the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this category.

Consumer loans and other smaller-balance loans are evaluated and categorized as "substandard," "doubtful" or "loss" based upon the regulatory definition of these classes and consistent with regulatory requirements. Leases are categorized as "special mention", "substandard", or "loss" based upon delinquency status and the prospect of collecting the remaining net investment balance owed under the lease. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as being "not rated."

The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the most recent analysis performed at September 30, 2023:



	Term Loans at Amortized Cost by Origination Year														Revolving Loans Converted to Term
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans				Total Loans
Construction
Pass	$	49,218	$	166,000	$	103,935	$	28,902	$	8,931	$	14,073	$	—	$	—	$	371,059
Special mention	—		—		—		—		—		125		—		—		125
Substandard	1,200		1,598		—		—		—		34		—		—		2,832


Total	50,418		167,598		103,935		28,902		8,931		14,232		—		—		374,016
Current period gross charge-offs	—		—		9		—		—		—						9
Commercial real estate, other
Pass	159,774		296,172		377,054		238,765		273,896		705,640		32,428		194		2,083,729
Special mention	1,000		7,374		1,950		4,303		5,178		17,863		947		45		38,615
Substandard	315		1,430		7,268		10,669		2,404		44,954		590		—		67,630
Doubtful	—		—		—		—		—		10		—		—		10

Total	161,089		304,976		386,272		253,737		281,478		768,467		33,965		239		2,189,984
Current period gross charge-offs	—		—		—		39		—		279						318
Commercial and industrial
Pass	129,859		188,569		221,410		88,762		68,408		132,029		222,517		56		1,051,554
Special mention	788		12,298		68		9,439		2,051		8,132		13,842		7,500		46,618
Substandard	34		6,477		5,286		5,764		1,723		6,976		4,193		142		30,453
Doubtful	—		—		—		—		—		184		—		—		184

Total	130,681		207,344		226,764		103,965		72,182		147,321		240,552		7,698		1,128,809

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	Term Loans at Amortized Cost by Origination Year							Revolving Loans Converted to Term
(Dollars in thousands)	2023	2022	2021	2020	2019	Prior	Revolving Loans		Total Loans
Current period gross charge-offs	—	—	—	13	—	198			211
Premium finance
Pass	181,786	7,462	3	—	—	—	—	—	189,251




Total	181,786	7,462	3	—	—	—	—	—	189,251
Current period gross charge-offs	2	76	1	—	—	—			79
Leases
Pass	176,044	126,255	59,878	19,171	7,122	1,786		—	390,256
Special mention	420	1,251	1,384	76	25	11			3,167
Substandard	1,410	3,461	3,116	483	322	420			9,212
Total	177,874	130,967	64,378	19,730	7,469	2,217	—	—	402,635
Current period gross charge-offs	90	625	850	218	165	30			1,978
Residential real estate
Pass	54,423	93,514	143,794	59,432	48,436	381,826	—	—	781,425
Special mention	—	—	—	—	—	111	—	—	111
Substandard	—	244	336	141	612	9,044	—	—	10,377

Loss	—	—	—	—	—	52	—	—	52
Total	54,423	93,758	144,130	59,573	49,048	391,033	—	—	791,965
Current period gross charge-offs	—	—	—	—	—	150			150
Home equity lines of credit
Pass	29,743	43,501	33,323	20,296	14,878	60,657	80	1,292	202,478

Substandard	81	40	87	21	91	1,130	—	—	1,450

Loss	—	—	—	—	—	12	—	—	12
Total	29,824	43,541	33,410	20,317	14,969	61,799	80	1,292	203,940
Current period gross charge-offs	—	—	—	—	—	106			106
Consumer, indirect
Pass	202,590	246,044	108,067	67,475	22,157	19,331	—	—	665,664

Substandard	169	704	803	510	211	235	—	—	2,632

Loss	16	39	9	11	—	—	—	—	75
Total	202,775	246,787	108,879	67,996	22,368	19,566	—	—	668,371
Current period gross charge-offs	251	1,488	665	207	59	126			2,796
Consumer, direct
Pass	54,619	41,130	20,085	9,714	3,854	4,850	—	—	134,252

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	Term Loans at Amortized Cost by Origination Year													Revolving Loans Converted to Term
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total Loans
Substandard	—		30		84		45		24		114		—	—	297

Loss	—		—		—		—		—		13		—	—	13
Total	54,619		41,160		20,169		9,759		3,878		4,977		—	—	134,562
Current period gross charge-offs	18		99		32		84		14		27				274
Deposit account overdrafts	857		—		—		—		—		—		—	—	857
Current period gross charge-offs	809		—		—		—		—		—				809
Total loans, at amortized cost	1,044,346		1,243,593		1,087,940		563,979		460,323		1,409,612		274,597	9,229	6,084,390
Total current period gross charge-offs	$	1,170	$	2,288	$	1,557	$	561	$	238	$	916			$	6,730

The following table summarizes the risk category of loans within Peoples' loan portfolio, including acquired loans, based upon the then most recent analysis performed at December 31, 2022:



	Term Loans at Amortized Cost by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Construction
Pass	$	82,143	$	110,719	$	27,893	$	20,223	$	656	$	4,061	$	44	$	81	$	245,739
Special mention	—		—		—		—		—		818		—		—		818
Substandard	—		2		—		—		—		382		—		—		384


Total	82,143		110,721		27,893		20,223		656		5,261		44		81		246,941
Commercial real estate, other
Pass	165,282		224,727		227,799		202,877		110,564		369,578		27,300		5,217		1,328,127
Special mention	—		189		1,099		5,519		3,111		29,334		105		—		39,357
Substandard	—		8,327		2,591		1,366		1,296		42,172		216		190		55,968
Doubtful	—		—		—		—		—		66		—		—		66

Total	165,282		233,243		231,489		209,762		114,971		441,150		27,621		5,407		1,423,518
Commercial and industrial
Pass	167,937		142,615		72,573		71,497		40,229		91,853		215,116		3,722		801,820
Special mention	10,248		14,981		11,923		2,711		236		4,877		16,235		—		61,211
Substandard	84		9,801		3,417		2,410		1,459		3,620		8,603		611		29,394
Doubtful	—		—		—		—		—		209		—		—		209

Total	178,269		167,397		87,913		76,618		41,924		100,559		239,954		4,333		892,634
Premium finance
Pass	158,778		419		—		—		—		—		—		—		159,197
Total	158,778		419		—		—		—		—		—		—		159,197
Leases
Pass	191,148		90,738		34,627		15,951		3,269		1,119		—		—		336,852
Special mention	1,741		2,477		140		22		24		—		—		—		4,404
Substandard	546		1,840		571		464		454		—		—		—		3,875
Total	193,435		95,055		35,338		16,437		3,747		1,119		—		—		345,131
Residential real estate

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	Term Loans at Amortized Cost by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Pass	78,313		138,860		58,869		42,840		28,174		364,635		—		—		711,691

Substandard	—		—		137		569		563		10,302		—		—		11,571

Loss	—		—		—		—		—		98		—		—		98
Total	78,313		138,860		59,006		43,409		28,737		375,035		—		—		723,360
Home equity lines of credit
Pass	41,781		35,768		19,863		14,820		13,800		50,291		334		2,096		176,657

Substandard	—		60		—		53		126		958		—		—		1,197

Loss	—		—		—		—		—		4		—		—		4
Total	41,781		35,828		19,863		14,873		13,926		51,253		334		2,096		177,858
Consumer, indirect
Pass	305,814		149,445		100,027		35,988		22,789		12,741		—		—		626,804

Substandard	384		811		659		266		304		193		—		—		2,617

Loss	—		5		—		—		—		—		—		—		5
Total	306,198		150,261		100,686		36,254		23,093		12,934		—		—		629,426
Consumer, direct
Pass	50,889		28,351		14,558		6,333		3,725		3,975		—		—		107,831

Substandard	97		63		138		46		21		150		—		—		515

Loss	—		—		—		—		—		17		—		—		17
Total	50,986		28,414		14,696		6,379		3,746		4,142		—		—		108,363
Deposit account overdrafts	722		—		—		—		—		—		—		—		722
Total loans, at amortized cost	$	1,255,907	$	960,198	$	576,884	$	423,955	$	230,800	$	991,453	$	267,953	$	11,917	$	4,707,150

Collateral Dependent Loans

Peoples has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

•Construction loans are typically secured by owner occupied commercial real estate or non-owner occupied investment real estate. Typically, owner occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties that are in process of construction. Non-owner occupied commercial construction loans are generally secured by office buildings and complexes, multi-family complexes, land under development, and other commercial and industrial real estate in process of construction.

•Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.

•Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable, and other commercial property.

•Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage, on residential real estate property.

•Home equity lines of credit are generally secured by second mortgages on residential real estate property.

•Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral.

•Leases are secured by commercial equipment and other essential business assets.

•Premium finance loans are secured by the unearned portion of the insurance premium being financed.

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The following table details Peoples' amortized cost of collateral dependent loans:


(Dollars in thousands)	September 30, 2023		December 31, 2022


Commercial real estate, other	—			8,362
Commercial and industrial	—			1,456
Residential real estate	508			536



Total collateral dependent loans	$	508		$	10,354

The decrease in collateral dependent loans at September 30, 2023, compared to December 31, 2022, was primarily due to three large-relationships that were paid in full during the nine months ended September 30, 2023.

Modifications for Borrowers Experiencing Financial Difficulty Subsequent to the Adoption of ASU 2022-02

As part of Peoples' loss mitigation activities, Peoples may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty. The most common modifications to the contractual terms of a loan to a borrower experiencing financial difficulty include an extension of the maturity date, a reduction in the interest rate for the remaining life of the loan, a temporary period of interest-only payments, and a reduction in the contractual payment amount for either a short period or the remaining term of the loan.

In addition to loan modifications, Peoples also provides other loss mitigation options, such as forbearance and repayment plans, to assist borrowers who experience financial difficulties. In assessing whether or not a borrower is experiencing financial difficulty, Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (1) the borrower is currently in payment default on any of the borrower's debt; (2) a payment default is probable in the foreseeable future without the modification; (3) the borrower has declared or is in the process of declaring bankruptcy; and (4) the borrower's projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan without a modification.

The following tables display the amortized cost of loans that were restructured during the three months and the nine months ended September 30, 2023, presented by loan classification.


During the Three Months Ended September 30, 2023

(Dollars in thousands)	Term Extension		Total		Percentage of Total by Loan Category(a)(b)

Commercial real estate	$	901	$	901	0.04	%
Commercial and industrial	2,352		2,352		0.21	%

Residential real estate	25		25		—	%
Home equity lines of credit	52		52		0.03	%



Total	$	3,330	$	3,330	0.05	%


During the Nine Months Ended September 30, 2023
	Payment Delay (Only)				Forbearance Plan and Term Extension				Percentage of Total by Loan Category(a)
(Dollars in thousands)	Forbearance Plan		Payment Deferral				Term Extension				Total
Construction	$	—	$	1,598	$	—	$	—	$	1,598	0.43	%
Commercial real estate	189		—		1,089		—		1,278		0.06	%
Commercial and industrial	—		—		5,130		293		5,423		0.48	%

Residential real estate	—		—		243		—		243		0.03	%
Home equity lines of credit	—		—		203		—		203		0.10	%



Total	$	189	$	1,598	$	6,665	$	293	$	8,745	0.14	%

(a) Based on the amortized cost basis as of period end, divided by the period end amortized cost basis of the corresponding class of financing receivable.

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The following tables summarize the financial impacts of loan modifications and payment deferrals made to loans during the three months and the nine months ended September 30, 2023, presented by loan classification.


During the Three Months Ended September 30, 2023
	Weighted-Average Term Extension (in months)	Average Amount Capitalized as a Result of a Payment Delay(a)

Commercial real estate	4	$	—
Commercial and industrial	4	—

Residential real estate	240	—
Home equity lines of credit	217	—


During the Nine Months Ended September 30, 2023
	Weighted-Average Term Extension (in months)	Average Amount Capitalized as a Result of a Payment Delay(a)

Commercial real estate	6	$	—
Commercial and industrial	5	—

Residential real estate	213	8,072
Home equity lines of credit	189	—
Consumer, indirect	2	—


(a) Represents the average amount of delinquency-related amounts that were capitalized as part of the loan balance. Amounts are in whole dollars.

The following table displays the amortized cost of loans that received a completed modification or payment deferral on or after January 1, 2023, the date Peoples adopted ASU 2022-02, through September 30, 2023, and that defaulted in the period presented. For purposes of this disclosure, Peoples defines loans that had a payment default as loans that were 90 days or more past due following a modification through September 30, 2023.


For the Nine Months Ended September 30, 2023
	Payment Delay as a Result of a Payment Deferral (Only)		Total


Commercial and industrial	$	245	$	245



Consumer, indirect	$	11	$	11


Total loans that subsequently defaulted	$	256	$	256

(1) Represents the sum of amortized cost and gross charge-off as of period end. Excludes loans that liquidated either through foreclosure, deed-in-lieu of foreclosure, or a short sale.

The following table displays an aging analysis of loans that were modified on or after January 1, 2023, the date Peoples adopted ASU 2022-02, through September 30, 2023, presented by classification and class of financing receivable.

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As of September 30, 2023
(Dollars in thousands)	30-59 Days Delinquent		60-89 Days Delinquent		90+ Days Delinquent		Total Delinquent		Current		Total
Construction	$	—	$	—	$	—	$	—	$	1,598	$	1,598
Commercial real estate	—		76		—		76		1,203		1,279
Commercial and industrial	—		276		2,042		2,318		3,105		5,423

Residential real estate	—		—		—		—		242		242
Home equity lines of credit	—		—		—		—		203		203



Total loans modified(a)	$	—	$	352	$	2,042	$	2,394	$	6,351	$	8,745

(a) Represents the amortized cost basis as of period end.

Troubled Debt Restructurings Disclosures Prior to the Adoption of ASU 2022-02

Prior to the adoption of ASU 2022-02, Peoples accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. See “Note 1 Summary of Significant Accounting Policies” in Peoples' 2022 Form 10-K for more information on our TDR policy, and “Note 1, Summary of Significant Accounting Policies” in this Form 10-Q for more information on the adoption of ASU 2022-02.

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The following table summarizes the loans that were modified as TDRs during the three months and the nine months ended September 30, 2022:


		Three Months Ended
		Recorded Investment (a)
(Dollars in thousands)	Number of Contracts	Pre-Modification		Post-Modification		Remaining Recorded Investment












September 30, 2022


Commercial and industrial	1	20		20		19

Residential real estate	7	323		361		354
Home equity lines of credit	2	119		119		119
Consumer, indirect	6	79		79		79
Consumer, direct	3	20		20		20
Consumer	9	99		99		99
Total	19	$	561	$	599	$	591
(a) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.


		Nine Months Ended
		Recorded Investment (a)
(Dollars in thousands)	Number of Contracts	Pre-Modification		Post-Modification		Remaining Recorded Investment












September 30, 2022

Commercial real estate, other	3	282		282		276
Commercial and industrial	6	1,309		1,313		801

Residential real estate	30	1,478		1,562		1,536
Home equity lines of credit	5	251		251		247
Consumer, indirect	19	237		237		237
Consumer, direct	6	63		63		63
Consumer	25	300		300		300
Total	69	$	3,620	$	3,708	$	3,160
(a) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Allowance for Credit Losses

As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2022 Form 10-K, Peoples estimates the allowance for credit losses using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. In management's estimation of expected credit losses, Peoples uses a one-year reasonable and supportable period across all segments. Following the reasonable and supportable period, Peoples reverts the macroeconomic variables to their long run average over a four-quarter reversion period.

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Changes in the allowance for credit losses for the three months and the nine months ended September 30, 2023 and September 30, 2022 are summarized below:


(Dollars in thousands)	Beginning Balance, June 30, 2023		Initial Allowance for Acquired PCD Assets (a)		(Recovery of) Provision for Credit Losses (b)		Charge-offs		Recoveries		Ending Balance, September 30, 2023
Construction	$	1,496	—		(255)		—		—		1,241
Commercial real estate, other	19,731		138		1,569		(278)		97		21,257
Commercial and industrial	11,028		3		(630)		(199)		3		10,205
Premium finance	431		—		66		(33)		12		476
Leases	10,377		—		2,052		(905)		168		11,692
Residential real estate	6,112		6		156		(50)		27		6,251
Home equity lines of credit	1,676		5		(9)		(32)		—		1,640
Consumer, indirect	7,610		—		683		(926)		149		7,516
Consumer, direct	2,642		1		(43)		(92)		11		2,519
Deposit account overdrafts	108		—		289		(319)		49		127
Total	$	61,211	$	153	$	3,878	$	(2,834)	$	516	$	62,924

(a)Includes purchase price adjustments related to acquisitions previously completed but were within the 12-month measurement period.

(b)Amount does not include the provision for the allowance for credit losses on unfunded commitments.


(Dollars in thousands)	Beginning Balance, June 30, 2022		Initial Allowance for Acquired PCD Assets (a)		(Recovery of) Provision for Credit Losses (b)		Charge-offs		Recoveries		Ending Balance, September 30, 2022
Construction	$	1,531	$	—	$	(67)	$	—	$	—	$	1,464
Commercial real estate, other	18,708		—		(995)		(57)		39		17,695
Commercial and industrial	8,572		—		72		(36)		3		8,611
Premium finance	311		—		279		(38)		1		553
Leases	7,585		377		560		(731)		99		7,890
Residential real estate	6,332		—		264		(168)		36		6,464
Home equity lines of credit	1,699		—		(50)		(5)		—		1,644
Consumer, indirect	6,234		—		1,207		(600)		71		6,912
Consumer, direct	1,321		—		343		(81)		9		1,592
Deposit account overdrafts	53		—		218		(274)		44		41
Total	$	52,346	$	377	$	1,831	$	(1,990)	$	302	$	52,866

(a)Includes purchase price adjustments related to acquisitions previously completed but were within the 12-month measurement period.

(b)Amount does not include the provision for the allowance for credit losses on unfunded commitments.

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(Dollars in thousands)	Beginning Balance, December 31, 2022		Initial Allowance for Acquired PCD Assets (a)		Provision for (Recovery of) Credit Losses (b)		Charge-offs		Recoveries		Ending Balance, September 30, 2023
Construction	$	1,250	$	—	$	—	$	(9)	$	—	$	1,241
Commercial real estate, other	17,710		418		3,307		(318)		140		21,257
Commercial and industrial	8,229		379		1,354		(211)		454		10,205
Premium finance	344		—		187		(79)		24		476
Leases	8,495		—		4,838		(1,978)		337		11,692
Residential real estate	6,357		260		(341)		(150)		125		6,251
Home equity lines of credit	1,693		18		35		(106)		—		1,640
Consumer, indirect	7,448		—		2,507		(2,796)		357		7,516
Consumer, direct	1,575		86		1,071		(274)		61		2,519
Deposit account overdrafts	61		—		701		(809)		174		127
Total	$	53,162	$	1,161	$	13,659	$	(6,730)	$	1,672	$	62,924

(a) Includes purchase price adjustments related to acquisitions previously completed but were within the 12-month measurement period

(b) Amount does not include the provision for the allowance for credit losses on unfunded commitments.



(Dollars in thousands)	Beginning Balance, December 31, 2021		Initial Allowance for Acquired PCD Assets (a)		(Recovery of) Provision for Credit Losses (b)		Charge-offs		Recoveries		Ending Balance, September 30, 2022
Construction	$	2,999	$	—	$	(1,535)	$	—	$	—	$	1,464
Commercial real estate, other	29,147		(451)		(10,908)		(357)		264		17,695
Commercial and industrial	11,063		(418)		(1,124)		(919)		9		8,611
Premium finance	379		—		247		(82)		9		553
Leases	4,797		801		3,650		(1,697)		339		7,890
Residential real estate	7,233		(509)		200		(524)		64		6,464
Home equity lines of credit	2,005		(11)		(333)		(46)		29		1,644
Consumer, indirect	5,326		(41)		2,821		(1,434)		240		6,912
Consumer, direct	961		—		877		(277)		31		1,592
Deposit account overdrafts	57		—		772		(938)		150		41
Total	$	63,967	$	(629)	$	(5,333)	$	(6,274)	$	1,135	$	52,866

(a)Includes purchase price adjustments related to acquisitions previously completed but were within the 12-month measurement period.

(b)Amount does not include the provision for the allowance for credit losses on unfunded commitments.

During the third quarter of 2023, Peoples recorded a total provision for credit losses of $4.1 million, which was driven by (i) loan growth, (ii) an increase in net charge-offs, (iii) updates to our prepayment, curtailment and funding rates, and (iv) a deterioration in macro-economic conditions used within the CECL model, partially offset by the release of reserves on individually analyzed loans. The increase in the allowance for credit losses at September 30, 2023 when compared to prior periods was driven by the establishment of an allowance for credit losses for loans acquired in the Limestone Merger that were not considered purchased credit deteriorated ("PCD").

During the third quarter of 2022, Peoples recorded a provision for credit losses of $1.8 million driven by a deterioration of macro-economic conditions, partially offset by a release of reserves on individually analyzed loans. Leases designated as PCD acquired from

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Vantage increased the allowance for credit losses by $377,000. Net charge-offs for the third quarter of 2022 were $1.7 million, and included charge-offs of three leases aggregating $0.6 million.

Peoples had recorded an allowance for unfunded commitments of $2.2 million and $2.0 million as of September 30, 2023 and December 31, 2022, respectively. The allowance for unfunded commitments (also referred to as "unfunded commitment liability") is presented in the “Accrued expenses and other liabilities” line of the Unaudited Consolidated Balance Sheets. The change in the allowance for unfunded commitments is also reflected in the "Provision for (recovery of) credit losses" line of the Unaudited Consolidated Statements of Operations.

Note 5 Goodwill and Other Intangible Assets

Goodwill

The following table details changes in the recorded amount of goodwill:


(Dollars in thousands)	September 30, 2023		December 31, 2022
Goodwill, beginning of year	$	292,397	$	264,193
Goodwill recorded from acquisitions	62,709		28,204
Goodwill, end of period	$	355,106	$	292,397

As of the close of business on April 30, 2023, Peoples completed its merger with Limestone Bancorp, Inc. ("Limestone") pursuant to an Agreement and Plan of Merger dated October 24, 2022, at which point Limestone merged with and into Peoples, and immediately thereafter, Limestone Bank, Inc., the subsidiary bank of Limestone, merged with and into Peoples Bank (collectively, the “Limestone Merger”). Peoples has recorded preliminary goodwill from the Limestone Merger totaling $62.1 million as of September 30, 2023.

On January 3, 2023, Peoples acquired a trust and investment business, for which Peoples has recorded $0.6 million in goodwill as of September 30, 2023.

On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage pursuant to an Equity Purchase Agreement, dated February 16, 2022, at which point Vantage became a wholly-owned subsidiary of Peoples Bank. During 2022, Peoples recorded $27.2 million of goodwill related to this acquisition, which was offset partially by an adjustment of $1.3 million to the goodwill balance related to the merger (the "Premier Merger") of Peoples with Premier Financial Bancorp, Inc. (“Premier”) on September 17, 2021.

Other Intangible Assets

Other intangible assets were comprised of the following at September 30, 2023, and at December 31, 2022:


(Dollars in thousands)	Core Deposits		Customer Relationships		Indefinite-Lived Trade Names		Total
September 30, 2023
Gross intangibles	$	26,464	$	39,241	$	2,491	$	68,196
Intangibles recorded from acquisitions	27,722		—		—		27,722
Accumulated amortization	(23,952)		(20,076)		—		(44,028)
Total acquisition-related intangibles	$	30,234	$	19,165	$	2,491	$	51,890
Servicing rights							1,498
Total other intangibles							$	53,388

December 31, 2022
Gross intangibles	$	26,464	$	25,173	$	1,274	$	52,911
Intangibles recorded from acquisitions	—		14,067		1,217		15,284
Accumulated amortization	(20,667)		(15,412)		—		(36,079)
Total acquisition-related intangibles	$	5,797	$	23,828	$	2,491	$	32,116
Servicing rights							1,816
Total other intangibles							$	33,932

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As of September 30, 2023, Peoples has recorded $27.7 million of core deposit intangibles related to the Limestone Merger. Refer to "Note 13 Acquisitions" for additional information.

Peoples recorded other intangible assets in 2022 related to the Vantage acquisition consisting of $10.8 million of customer relationship intangible assets, $1.2 million of non-compete intangible assets, and $1.2 million of indefinite-lived trade name intangible assets. Peoples also recorded $2.0 million of customer relationship intangible assets and $0.1 million of non-compete intangible assets related to the acquisition of Elite Agency, Inc. ("Elite") in 2022. Refer to "Note 13 Acquisitions" for additional information.

The following table details estimated aggregate future amortization of other intangible assets at September 30, 2023:


(Dollars in thousands)	Core Deposits		Customer Relationships		Total
Remaining three months of 2023	$	1,692	$	1,554	$	3,246
2024	5,881		5,343		11,224
2025	4,614		4,255		8,869
2026	3,738		3,114		6,852
2027	3,046		2,289		5,335
Thereafter	11,263		2,610		13,873
Total	$	30,234	$	19,165	$	49,399

The weighted average amortization period of other intangible assets is 9.2 years.

Note 6 Deposits

Peoples’ deposit balances were comprised of the following:


(Dollars in thousands)	September 30, 2023		December 31, 2022
Retail certificates of deposits ("CDs"):
$100 or more	$	673,848	$	263,341
Less than $100	524,885		266,895
Total Retail CDs	1,198,733		530,236
Interest-bearing deposit accounts	1,181,079		1,160,182
Savings accounts	987,170		1,068,547
Money market deposit accounts	730,902		617,029
Governmental deposit accounts	761,625		625,965

Brokered CDs	608,914		125,580
Total interest-bearing deposits	5,468,423		4,127,539
Non-interest-bearing deposits	$	1,569,095	1,589,402
Total deposits	$	7,037,518	$	5,716,941

Uninsured deposits were $1.9 billion and $1.6 billion at September 30, 2023 and at December 31, 2022, respectively. Uninsured amounts are estimated based on the portion of the respective customer account balances that exceeded the FDIC limit of $250,000. Peoples pledges investment securities against certain governmental deposit accounts, which covered over $812.7 million of the uninsured deposit balances at September 30, 2023.

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Uninsured time deposits are broken out below by time remaining until maturity.


(Dollars in thousands)	September 30, 2023		December 31, 2022
3 months or less	$	34,976	$	19,282
Over 3 to 6 months	58,092		14,871
Over 6 to 12 months	135,603		14,383
Over 12 months	33,184		52,216
Total	$	261,855	$	100,752

The contractual maturities of CDs for each of the next five years, including the remainder of 2023, and thereafter are as follows:


(Dollars in thousands)	Retail		Brokered		Total
Remaining three months ending December 31, 2023	$	200,562	$	608,914	$	809,476
Year ending December 31, 2024	899,116		—		899,116
Year ending December 31, 2025	45,630		—		45,630
Year ending December 31, 2026	19,560		—		19,560
Year ending December 31, 2027	26,296		—		26,296
Thereafter	7,569		—		7,569
Total CDs	$	1,198,733	$	608,914	$	1,807,647

At September 30, 2023, Peoples had eleven effective interest rate swaps, with an aggregate notional value of $105.0 million, of which $105.0 million were funded by brokered CDs. Brokered CDs used to fund interest rate swaps are expected to be extended every 90 days through the maturity dates of the swaps. Additional information regarding Peoples' interest rate swaps can be found in "Note 10 Derivative Financial Instruments."

Note 7 Stockholders’ Equity

The following table details the progression in Peoples’ common shares and treasury stock during the nine months ended September 30, 2023:


	Common Shares	Treasury Stock
Shares at December 31, 2022	29,857,920	1,643,461
Changes related to stock-based compensation awards:

Release of restricted common shares	—	34,710
Cancellation of restricted common shares	—	15,726

Grant of restricted common shares	—	(249,645)
Grant of unrestricted common shares	—	(1,900)
Changes related to deferred compensation plan for Boards of Directors:
Purchase of treasury stock	—	15,737
Disbursed out of treasury stock	—	(4,368)

Common shares issued under dividend reinvestment plan	38,305	—
Common shares issued under compensation plan for Boards of Directors	—	(15,827)

Common shares issued under employee stock purchase plan	—	(25,244)
Issuance of common shares related to the Limestone Merger	6,827,668	—

Shares at September 30, 2023	36,723,893	1,412,650

On January 28, 2021, Peoples' Board of Directors approved a share repurchase program authorizing Peoples to purchase up to an aggregate of $30.0 million of Peoples' outstanding common shares. At September 30, 2023, Peoples had repurchased 263,183 common shares totaling $7.4 million under the share repurchase program. There were no common shares repurchased during the first nine months of 2023.

Under Peoples' Amended Articles of Incorporation, Peoples is authorized to issue up to 50,000 preferred shares, in one or more series, having such voting powers, designations, preferences, rights, qualifications, limitations and restrictions as designated by Peoples' Board of Directors. At September 30, 2023, Peoples had no preferred shares issued or outstanding.

On October 23, 2023, Peoples' Board of Directors declared a quarterly cash dividend of $0.39 per common share, payable on November 20, 2023, to shareholders of record on November 6, 2023. The following table details the cash dividends declared per common share during the four quarters of 2023 and the comparable periods of 2022:


	2023		2022
First quarter	$	0.38	$	0.36
Second quarter	0.39		0.38
Third quarter	0.39		0.38
Fourth quarter	0.39		0.38
Total dividends declared	$	1.55	$	1.50

Accumulated Other Comprehensive (Loss) Income

The following table details the change in the components of Peoples’ accumulated other comprehensive (loss) income during the nine months ended September 30, 2023:


(Dollars in thousands)	Unrealized (Loss) Gain on Securities		Unrecognized Net Pension and Postretirement Costs		Unrealized Gain (Loss) on Cash Flow Hedges		Accumulated Other Comprehensive (Loss) Income
Balance, December 31, 2022	$	(129,896)	$	(1,633)	$	4,393	$	(127,136)
Reclassification adjustments to net income:
Realized loss on sale of securities, net of tax	1,616		—		—		1,616
Realized loss due to settlement and curtailment, net of tax	—		1,858		—		1,858
Other comprehensive (loss) income, net of reclassifications and tax	(19,824)		(180)		(130)		(20,134)
Balance, September 30, 2023	$	(148,104)	$	45	$	4,263	$	(143,796)

Note 8 Employee Benefit Plans

Peoples sponsored a noncontributory defined benefit pension plan that covered substantially all employees hired before January 1, 2010. The plan provided retirement benefits based on an employee’s years of service and compensation. For employees hired before January 1, 2003, the amount of post-retirement benefit was based on the employee’s average monthly compensation over the highest five consecutive years out of the employee’s last ten years with Peoples while an eligible employee. For employees hired on or after January 1, 2003, the amount of post-retirement benefit was based on 2% of the employee’s annual compensation during the years 2003 through 2009, plus accrued interest. During the third quarter of 2023, Peoples terminated its pension plan by settling the remaining benefit obligation of $7.7 million. The pension plan had been closed to new entrants since January 1, 2010. Peoples recorded a settlement charge of $2.4 million in the third quarter of 2023 in relation to the termination of the pension plan. Peoples does not anticipate further expenses related to the termination.

Peoples also provides post-retirement health and life insurance benefits to certain former employees and directors. Only those individuals who retired before January 27, 2012 were eligible for life insurance benefits. Since January 1, 2011, all retirees who desire to participate in the Peoples Bank medical plan may do so by electing COBRA, which provides up to 18 months of coverage; retirees over the age of 65 also have the option to pay to participate in a group Medicare supplemental plan. Peoples only pays 100% of the cost of health benefits for those individuals who retired before January 1, 1993. For all others, the retiree is responsible for most, if not all, of the cost of the health benefits. Peoples’ policy is to fund the cost of the benefits as they arise.

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Note 9 Earnings Per Common Share

The calculations of basic and diluted earnings per common share were as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands, except per common share data)	2023		2022		2023		2022
Net income available to common shareholders	$	31,882	$	25,978	$	79,538	$	74,443
Less: Dividends paid on unvested common shares	143		102		388		252
Less: Undistributed income allocated to unvested common shares	79		24		190		65
Net earnings allocated to common shareholders	$	31,660	$	25,852	$	78,960	$	74,126

Weighted-average common shares outstanding	34,818,346		27,865,416		31,771,061		27,929,720
Effect of potentially dilutive common shares	243,551		107,839		206,425		79,543
Total weighted-average diluted common shares outstanding	35,061,897		27,973,255		31,977,486		28,009,263

Earnings per common share:
Basic	$	0.91	$	0.93	$	2.49	$	2.65
Diluted	$	0.90	$	0.92	$	2.47	$	2.65
Anti-dilutive common shares excluded from calculation:
Restricted common shares	3,046		1,832		10,547		—

Note 10 Derivative Financial Instruments

Peoples utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements. The fair value of derivative financial instruments is included in the "Other assets" and the "Accrued expenses and other liabilities" lines in the accompanying Unaudited Consolidated Balance Sheets, while cash activity related to these derivative financial instruments is included in the activity in "Net cash provided by operating activities" in the Unaudited Condensed Consolidated Statements of Cash Flows.

Derivative Financial Instruments and Hedging Activities - Risk Management Objective of Using Derivative Financial Instruments

Peoples is exposed to certain risks arising from both its business operations and economic conditions. Peoples principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Peoples manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities. Peoples also manages interest rate risk through the use of derivative financial instruments. Specifically, Peoples enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known or expected cash amounts, the values of which are determined by interest rates. Peoples’ derivative financial instruments are used to manage differences in the amount, timing and duration of Peoples' known or expected cash receipts and its known or expected cash payments principally related to certain variable rate borrowings. Peoples also has interest rate derivative financial instruments that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Peoples' assets or liabilities. Peoples manages a matched book with respect to customer-related derivative financial instruments in order to minimize its net risk exposure resulting from such transactions.

Cash Flow Hedges of Interest Rate Risk

Peoples' objectives in using interest rate derivative financial instruments are to add stability to interest income and expense, and to manage its exposure to interest rate movements. To accomplish these objectives, Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. At September 30, 2023, Peoples had entered into eleven interest rate swap contracts with an aggregate notional value of $105.0 million. Peoples will pay a fixed rate of interest for up to ten years while receiving a floating rate component of interest equal to term SOFR. The interest received on the floating rate component is intended to offset the interest paid on rolling three-month brokered CDs, which will continue to be rolled through the life of the interest rate swaps. At September 30, 2023 and at December 31, 2022, the interest rate swaps were designated as cash flow hedges of $105.0 million and $125.0 million, respectively, in brokered CDs, which are expected to be extended every 90 days through the maturity dates of the interest rate swaps.

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For derivative financial instruments designated as cash flow hedges, the effective and ineffective portions of changes in the fair value of each derivative financial instrument is reported in accumulated other comprehensive (loss) income ("AOCI") (outside of earnings), net of tax, and are reclassified to interest expense as interest payments are made or received on Peoples' variable-rate liabilities. Peoples assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the hedging derivative financial instrument with the changes in cash flows of the designated hedged transaction. The reset dates and the payment dates on the brokered CDs are matched to the reset dates and payment dates on the receipt of the term SOFR rate (or the three-month LIBOR floating portion prior to June 30, 2023) of the swaps to ensure effectiveness of the cash flow hedge. During the three months ended September 30, 2023, and 2022, Peoples recorded reclassifications of losses to earnings of $0.9 million and $0.2 million, respectively. For the nine months ended September 30, 2023 and 2022, Peoples recorded reclassifications of losses to earnings of $2.3 million and $1.3 million, respectively. During the next twelve months, Peoples estimates that $1.3 million of AOCI will be reclassified as an addition to interest expense.

The following table summarizes information about the interest rate swaps designated as cash flow hedges:


(Dollars in thousands)	September 30, 2023			December 31, 2022
Notional amount	$	105,000		$	125,000
Weighted average pay rates	2.22		%	2.26		%
Weighted average receive rates	5.19		%	4.44		%
Weighted average maturity	2.2 years			2.6 years
Pre-tax changes in fair value included in AOCI	$	5,547		$	5,727

The following table presents changes in fair value recorded in AOCI and in the Consolidated Statements of Operations related to the cash flow hedges:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2023		2022		2023		2022
Amount of losses (gains) recorded in AOCI, pre-tax	$	(118)	$	(3,388)	$	165	$	(10,948)

The following table reflects the cash flow hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:


	September 30, 2023				December 31, 2022
(Dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in "Other assets":
Interest rate swaps related to debt	$	105,000	$	5,440	$	125,000	$	5,594

Non-Designated Hedges

Peoples maintains an interest rate protection program for commercial loan customers, which was established in 2010. Under this program, Peoples originates variable rate loans with interest rate swaps, where the customer enters into an interest rate swap with Peoples on terms that match the terms of the loan. By entering into the interest rate swap with the customer, Peoples Bank effectively provides the customer with a fixed rate loan while creating a variable rate asset for Peoples Bank. Peoples Bank offsets its exposure in the interest rate swap by entering into an offsetting interest rate swap with an unaffiliated institution. These interest rate swaps do not qualify as designated hedges; therefore, each interest rate swap is accounted for as a standalone derivative financial instrument. These interest rate swaps did not have a material impact on Peoples' results of operations or financial condition at or for the three months and the nine months ended September 30, 2023 and as of or for the year ended December 31, 2022.

The following table reflects the non-designated hedges, which are included in the Unaudited Consolidated Balance Sheets at fair value:

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	September 30, 2023				December 31, 2022
(Dollars in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in "Other assets":
Interest rate swaps related to commercial loans	$	395,721	$	29,270	$	390,126	$	28,529

Included in "Accrued expenses and other liabilities":
Interest rate swaps related to commercial loans	$	395,721	$	29,491	$	390,126	$	28,529

Pledged Collateral

Peoples pledges or receives collateral for all interest rate swaps. When the fair value of Peoples' interest rate swaps is in a net liability position, Peoples must pledge collateral, and, when the fair value of Peoples' interest rate swaps is in a net asset position, the respective counterparties must pledge collateral. At September 30, 2023 and at December 31, 2022, Peoples had no cash pledged, while counterparties had $22.2 million of cash pledged at September 30, 2023 and $20.9 million of cash pledged at December 31, 2022. Peoples had no pledged investment securities at September 30, 2023 or at December 31, 2022, while the counterparties had pledged investment securities in the amounts of $2.2 million at September 30, 2023 and $2.5 million at December 31, 2022.

Note 11 Stock-Based Compensation

Under the Peoples Bancorp Inc. Fourth Amended and Restated 2006 Equity Plan (the "2006 Equity Plan"), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted common share awards, stock appreciation rights, performance units and unrestricted common share awards to employees and non-employee directors. The total number of common shares available under the 2006 Equity Plan is 1,493,297. The maximum number of common shares that can be issued for incentive stock options is 750,000 common shares. Since February 2009, Peoples has granted restricted common shares to employees, and periodically to non-employee directors, subject to the terms and conditions prescribed by the 2006 Equity Plan. In general, common shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are available, common shares are issued from authorized but unissued common shares.

Restricted Common Shares

Under the 2006 Equity Plan, Peoples may award restricted common shares to officers, key employees and non-employee directors. In general, the restrictions on the restricted common shares awarded to officers and key employees expire after periods ranging from one to five years. Since 2018, common shares awarded to non-employee directors have vested immediately upon grant with no restrictions. In the first nine months of 2023, Peoples granted an aggregate of 188,372 restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse three years after the grant date; provided that in order for the restricted common shares to vest in full, Peoples must have reported positive net income and maintained a well-capitalized status by regulatory standards for each of the three fiscal years preceding the vesting date.

The following table summarizes the changes to Peoples’ restricted common shares for the nine months ended September 30, 2023:


	Time-Based Vesting			Performance-Based Vesting
	Number of Common Shares	Weighted-Average Grant Date Fair Value		Number of Common Shares	Weighted-Average Grant Date Fair Value
Oustanding at January 1, 2023	138,522	$	27.25	295,875	$	32.20
Awarded	61,273	26.51		188,372	30.30
Released	(33,220)	24.73		(70,458)	32.91
Forfeited	(6,547)	30.54		(9,179)	31.14
Outstanding at September 30, 2023	160,028	$	27.36	404,610	$	31.21

For the nine months ended September 30, 2023, the intrinsic value for restricted common shares released was $3.0 million compared to $3.7 million for the nine months ended September 30, 2022.

Stock-Based Compensation

Peoples recognizes stock-based compensation, which is included as a component of Peoples’ salaries and employee benefit costs, for restricted and unrestricted common shares, as well as purchases made by participants in the employee stock purchase plan. For restricted common shares, Peoples recognizes stock-based compensation based on the estimated fair value of the awards expected to vest on the grant date. The estimated fair value is then expensed over the vesting period, which is normally three years. Peoples also has an employee stock purchase plan whereby employees can purchase Peoples' common shares at a discount of 15%. The following table summarizes the amount of stock-based compensation expense and related tax benefit recognized for each period:

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2023		2022		2023		2022
Employee stock-based compensation expense:
Stock grant expense	$	1,074	$	780	$	4,233	$	2,933
Employee stock purchase plan expense	33		2		106		54

Total employee stock-based compensation expense	1,107		782		$	4,339	$	2,987
Non-employee director stock-based compensation expense	139		127		$	410	$	378
Total stock-based compensation expense	1,246		909		$	4,749	$	3,365
Recognized tax benefit	(291)		(195)		(1,109)		(721)
Net stock-based compensation expense	$	955	$	714	$	3,640	$	2,644

The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares on that date. Total unrecognized stock-based compensation expense related to unvested restricted common share awards was $6.0 million at September 30, 2023, which will be recognized over a weighted-average period of 2.1 years.

Note 12 Revenue

The following table details Peoples' revenue from contracts with customers:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2023		2022		2023		2022
Insurance income:
Commission and fees from sale of insurance policies (a)	$	4,133	$	3,465	$	11,844	$	10,323
Fees related to third-party administration services (a)	77		88		233		252
Performance-based commissions (b)	40		65		1,602		1,420
Trust and investment income:
Fiduciary income (a)	2,506		2,376		7,710		7,618
Brokerage income (a)	1,782		1,578		5,076		4,858
Electronic banking income:
Interchange income (a)	5,124		4,150		14,341		12,564
Promotional and usage income (a)	1,342		1,111		4,034		3,369
Deposit account service charges:
Ongoing maintenance fees for deposit accounts (a)	1,577		1,353		4,661		3,971
Transaction-based fees (b)	2,939		2,480		7,531		6,846
Commercial loan swap fees (b)	475		224		593		662
Other non-interest income transaction-based fees (b)	391		255		1,199		826
Total revenue from contracts with customers	$	20,386	$	17,145	$	58,824	$	52,709
Timing of revenue recognition:
Services transferred over time	$	16,541	$	14,121	$	47,899	$	42,955
Services transferred at a point in time	3,845		3,024		10,925		9,754
Total revenue from contracts with customers	$	20,386	$	17,145	$	58,824	$	52,709

(a) Services transferred over time.

(b) Services transferred at a point in time.

Peoples records contract assets for income that has been recognized over a period of time for fulfillment of performance obligations, but has not yet been received related to electronic banking income and certain insurance income. This income typically relates to bonuses for which Peoples is eligible, but will not receive until a certain time in the future. Peoples records contract liabilities for payments received for commission income related to the sale of insurance policies, for which the performance obligations have not yet been fulfilled. The contract liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled, which is over the insurance policy period. Peoples also records contract liabilities for bonuses received related to electronic banking income, for which the performance obligations have not yet been fulfilled. The contract

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liabilities are recognized as income over time, during the period in which the performance obligations are fulfilled related to electronic banking income.

The following table details the changes in Peoples' contract assets and contract liabilities for the nine-month period ended September 30, 2023:


	Contract Assets		Contract Liabilities
(Dollars in thousands)
Balance, January 1, 2023	$	1,294	$	5,634
Additional income receivable	210		—
Additional deferred income	—		106

Recognition of income previously deferred	—		(163)
Balance, September 30, 2023	$	1,504	$	5,577

Note 13 Acquisitions

Limestone Bancorp, Inc.

As of the close of business on April 30, 2023, Peoples completed the Limestone Merger. In connection with the Limestone Merger, Limestone Bank, Inc., which operated 20 branches in Kentucky, merged into Peoples Bank. As consideration in the Limestone Merger, Limestone shareholders were paid 0.90 common shares of Peoples for each full share of Limestone that was owned at the merger date, resulting in the issuance of 6,827,668 common shares by Peoples, or aggregate consideration of $177.9 million. Peoples accounted for this transaction as a business combination under the acquisition method.

Peoples recorded acquisition-related expenses related to the Limestone Merger, which included $4.4 million and $15.7 million in non-interest expense for the three months and the nine months ended September 30, 2023, respectively. For the third quarter of 2023, the $4.4 million of acquisition-related non-interest expense consisted of $2.1 million in other non-interest expense, $1.3 million in data processing and software expense, $0.6 million in salaries and employee benefit costs, and $0.4 million in professional fees. For the nine months ended September 30, 2023, the $15.7 million of acquisition-related non-interest expense consisted of $5.7 million in salaries and employee benefit costs, $5.5 million in professional fees, $3.0 million in other non-interest expense, $1.3 million in data processing and software expense, and $0.2 million in various other non-interest expense line items. The other non-interest expenses were primarily due to $1.8 million of early contract termination fees on Limestone contracts driven by the system conversions, which took place in the third quarter of 2023.

The following table provides the preliminary purchase price calculation as of the date of the Limestone Merger, and the assets acquired and liabilities assumed at their estimated fair values. The estimated fair values below were considered preliminary as of September 30, 2023, and are subject to adjustment for up to one year after April 30, 2023. Valuations subject to change include, but are not limited to, loans, including the designation of PCD loans, deferred tax assets and liabilities, long-term borrowings, and certain other assets and other liabilities.


(Dollars in thousands)	Fair Value
Total purchase price	$	177,931










Assets
Cash and balances due from banks	6,422
Interest-bearing deposits in other banks	87,115
Total cash and cash equivalents	93,537
Available-for-sale investment securities, at fair value	166,944

Other investment securities	5,716

Total investment securities	172,660
Loans	1,079,980

Allowance for credit losses (on PCD loans)	(1,161)
Net loans	1,078,819












Bank premises and equipment, net of accumulated depreciation	17,690

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(Dollars in thousands)	Fair Value
Bank owned life insurance	31,343



Other intangible assets	27,722
Other assets	34,925
Total assets	1,456,696
Liabilities
Deposits:

Non-interest-bearing	262,727
Interest-bearing	971,457
Total deposits	1,234,184
Short-term borrowings	60,000
Long-term borrowings	33,744
Accrued expenses and other liabilities	12,967
Total liabilities	1,340,895


Net assets	115,801
Goodwill	$	62,130

The goodwill recorded in connection with the Limestone Merger is related to expected synergies to be gained from the combination of Limestone with Peoples' operations. The employees retained from the Limestone Merger and the geographic locations of Limestone should allow Peoples to continue to grow the loan and deposit portfolios while also increasing Peoples' ability to penetrate the new markets, which should benefit Peoples in future periods. During Peoples' evaluation of intangible assets, it was determined that an assembled workforce intangible asset was not separately recognizable and was included in goodwill. Peoples recorded a core deposit asset in other intangible assets related to the Limestone Merger.

The estimated fair values presented in the above table reflect additional information that was obtained during the three months ended September 30, 2023, which resulted in changes to certain fair value estimates made as of the date of the Limestone Merger. Adjustments to acquisition date estimated fair values are recorded during the period in which they occur and, as a result, previously recorded results have changed. The below table reflects the changes in the estimated fair value as they impact goodwill at September 30, 2023:


(Dollars in thousands)	Fair Value












Cash and balances due from banks	1,162

Total cash and cash equivalents	1,162





Loans	727

Allowance for credit losses (on PCD loans)	(153)
Net loans	574


















Other assets	(447)
Total assets	1,289












Net assets	1,289
Goodwill	$	(1,289)

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Loans acquired by Peoples in a business combination that have evidence of more than insignificant credit deterioration, which includes loans as to which Peoples believes it is probable that Peoples will be unable to collect all contractually required payments, are considered "purchased credit deteriorated" (or "PCD") loans. Acquired PCD loans are reported net of the unamortized fair value adjustment. These loans are recorded at the purchase price, and an allowance for credit losses is determined based upon discrete credit marks, along with discounted cash flow models based upon similar pools of loans, using a similar methodology as for other loans. The following table details the fair value adjustment for acquired PCD loans as of the acquisition date:



(Dollars in thousands)	Par Value		Allowance for Credit Losses		Non-Credit (Discount) Premium		Fair Value
PCD loans

Commercial real estate, other	16,390		(418)		(877)		15,095
Commercial and industrial	16,466		(379)		(610)		15,477

Residential real estate	6,994		(259)		(979)		5,756
Home equity lines of credit	774		(18)		11		767

Consumer	1,029		(86)		78		1,021
Fair value	$	41,653	$	(1,160)	$	(2,377)	$	38,116

Peoples' operating results for the three months and the nine months ended September 30, 2023 include the operating results of the acquired assets and assumed liabilities of Limestone subsequent to the Limestone Merger. Due to the timing of the acquisition closing and the conversion of Limestone systems, as well as other streamlining and integration of the operating activities into those of Peoples, historical reporting for the former Limestone operations is impracticable and the separate disclosures of revenue from the assets acquired and income before income taxes is impracticable for the periods subsequent to the acquisition. The following table presents unaudited pro forma information as if the Limestone Merger had occurred on January 1, 2022. The pro forma adjustments include any changes in interest income due to the accretion of discounts, or amortization of premiums, associated with the fair value adjustments to acquired loans, interest-bearing deposits, long-term borrowings and customer deposit intangibles that would have resulted had the assets and liabilities been acquired as of January 1, 2022. The pro forma information excludes Peoples' acquisition-related expenses as described above as well as a provision of credit losses of $9.4 million recorded to establish an allowance for credit losses for non-purchased credit deteriorated loans relating to the acquired loans. The pro forma information reflects the adoption of the current expected credit loss ("CECL") accounting standard by Limestone as of January 1, 2023. The pro forma information does not necessarily reflect the results of operations that would have occurred had Peoples acquired Limestone on January 1, 2022. Additionally, cost savings and other business synergies related to the acquisition are not reflected in the pro forma amounts.


	Unaudited Pro Forma For
	Three Months Ended				Nine Months Ended
(Dollars in thousands)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Net interest income	$	88,541	$	83,235	$	266,367	$	228,719
Non-interest income	23,204		22,594		63,756		66,524
Net income	31,906		33,319		98,810		92,639

Vantage Financial, LLC

On March 7, 2022, Peoples Bank purchased 100% of the equity of Vantage, a nationwide provider of equipment financing headquartered in Excelsior, Minnesota. Peoples Bank acquired assets comprising Vantage's lease business, including $154.9 million in leases and certain third-party debt in the amount of $106.9 million. Under the terms of the acquisition agreement, Peoples Bank paid cash consideration of $54.0 million, and also repaid $28.9 million in recourse debt on behalf of Vantage, for total consideration of $82.9 million. Vantage offers mid-ticket equipment leases, primarily for business essential information technology equipment across a wide-array of industries.

Peoples recorded acquisition-related expenses during the nine months ended September 30, 2023 of $46,000 related to the Vantage acquisition, which consisted of professional fees. Peoples recorded acquisition-related expenses during the first nine months of 2022 of $1.5 million related to the Vantage acquisition, which included $1.1 million in professional fees.

The following table provides the final purchase price calculation as of the date of the acquisition of Vantage, and the assets acquired and liabilities assumed at their estimated fair values.

(Dollars in thousands)

Fair Value

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(Dollars in thousands)	Fair Value
Total purchase price	$	82,893


Net assets at fair value
Assets
Cash and due from banks	$	1,444







Leases	155,726







Allowance for credit losses (on PCD leases)	(801)
Net leases	154,925



Bank premises and equipment	116
Other intangible assets	13,207
Other assets	1,506

Total assets	$	171,198
Liabilities
Borrowings	$	106,919





Accrued expenses and other liabilities	8,550
Total liabilities	$	115,469
Net assets	$	55,729
Goodwill	$	27,164

The goodwill recorded in connection with the Vantage acquisition is related to expected synergies to be gained from the combination of Vantage with Peoples' operations. The employees retained from the Vantage acquisition, along with Peoples' resources, should allow Peoples to continue to grow the lease portfolio and should benefit Peoples in future periods. During Peoples' evaluation of intangible assets, it was determined that an assembled workforce intangible asset was not separately recognizable and was included in goodwill. Peoples recorded other intangible assets, which included a customer relationship intangible, a trade-name intangible and non-compete agreements, related to this transaction.

The following table details the fair value adjustment for acquired PCD leases related to the Vantage acquisition as of the acquisition date:



(Dollars in thousands)	Par Value		Allowance for Credit Losses		Non-Credit Premium		Fair Value
PCD leases



Leases	$	3,412	$	(801)	$	1,120	$	3,731




Fair value	$	3,412	$	(801)	$	1,120	$	3,731

Note 14 Leases

Peoples has elected certain practical expedients, in accordance with ASC 842 - Leases ("ASC 842"). As a lessor, Peoples has made an accounting policy election to exclude from the consideration in the contract, and from variable payments not included in the consideration in the contract, all sales and other similar taxes assessed. Peoples has also made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component for all leases subject to ASC 842.

Lessor Arrangements

Leases originated by Peoples, that Peoples has the positive intent and ability to hold for the foreseeable future or to maturity or payoff, are reported at the net investment in the lease, net of initial direct costs, charge-offs and an allowance for credit losses. Peoples considers leases past due if any required principal or interest payments have not been received as of the date such payments were required to be made under the terms of the lease agreement. Upon detection of the reduced ability of a lessee to meet cash flow obligations, a lease is typically charged down to the net realizable value, with the residual balance placed on nonaccrual status. Leases deemed to be uncollectable are charged against the allowance for credit losses, while recoveries of previously charged-off amounts are credited to the allowance for credit losses.

Peoples began originating leases with the acquisition of leases from NSL in the second quarter of 2021, and expanded its lease portfolio with the acquisition of Vantage in the first quarter of 2022. The leases acquired from NSL were determined to be sales-type leases, as these leases are structured as dollar buy-out, whereby the lessee pays one dollar at maturity of the lease to purchase the

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equipment. Originated leases continue to be classified as sales-type leases. These leases do not typically contain residual value guarantees; however, if a lease contains a residual value guarantee, Peoples reduces its residual asset risk by obtaining a security deposit from the lessee. The leases acquired through Vantage were determined to be either sales-type or direct financing leases based primarily on whether they included a dollar buy-out or a fair market value buy-out, respectively. As a lessor, Peoples originates commercial equipment leases either directly to the customer or indirectly through vendor programs. Equipment leases relate to automotive, construction, health care, manufacturing, office, restaurant, information technology and other equipment. These leases include an estimated residual value, which is assessed for impairment as part of the allowance for credit losses. Lease (loss) income noted in the table below includes (i) gains on the early termination of leases, (ii) fees received for referrals, (iii) gains and losses recognized on the sales of residual assets and (iv) syndication income. Additional information regarding Peoples' leases can be found in "Note 4 Loans and Leases."

The table below details Peoples' lease income:


	Three Months Ended				Nine Months Ended
(Dollars in thousands)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Interest and fees on leases (a)	$	11,508	$	9,628	$	31,426	$	26,271
Lease (loss) income	(66)		1,725		2,730		2,931
Total lease income	$	11,442	$	11,353	$	34,156	$	29,202

(a)Included in "Interest and fees on loans and leases" in the Unaudited Consolidated Statements of Operations. For additional information, see "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

The following table summarizes the net investment in leases, which is included in "Loans and leases, net of deferred fees and costs" on the Unaudited Consolidated Balance Sheets:


(Dollars in thousands)	September 30, 2023		December 31, 2022
Lease payments receivable, at amortized cost	$	444,270	$	367,681
Estimated residual values	36,425		35,045
Initial direct costs	6,173		4,233
Deferred revenue	(84,233)		(61,828)
Net investment in leases	402,635		345,131
Allowance for credit losses - leases	(11,692)		(8,495)
Net investment in leases, after allowance for credit losses	$	390,943	$	336,636

The following table summarizes the contractual maturities of leases:


(Dollars in thousands)	Balance
Remaining three months ending December 31, 2023	$	28,442
Year ending December 31, 2024	106,588
Year ending December 31, 2025	105,727
Year ending December 31, 2026	82,368
Year ending December 31, 2027	66,925
Thereafter	54,220
Lease payments receivable, at amortized cost	$	444,270

Lessee Arrangements

Peoples leases certain banking facilities and equipment under various agreements with original terms providing for fixed monthly payments over periods generally ranging from two to thirty years. Certain leases may include options to extend or terminate the lease. Only those renewal and termination options which Peoples is reasonably certain of exercising are included in the calculation of the lease liability. Certain leases contain rent escalation clauses calling for rent increases over the term of the lease, which are included in the calculation of the lease liability. At September 30, 2023, Peoples did not have any leases that met the criteria for finance leases. Right of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement or the remeasurement date of a lease based on the present value of lease payments over the remaining lease term. Operating lease ROU assets include lease payments made at or before the commencement date and initial indirect costs. Operating

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lease ROU assets exclude lease incentives. Short-term leases of certain facilities and equipment, with lease terms of 12 months or less, are recognized on a straight-line basis over the lease term and do not have an ROU asset or lease liability.

The table below details Peoples' lease expense, which is included in "Net occupancy and equipment expense" in the Unaudited Consolidated Statements of Operations:


	Three Months Ended				Nine Months Ended
(Dollars in thousands)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Operating lease expense	$	474	$	630	2,262		1,893
Short-term lease expense	84		208		174		555
Total lease expense	$	558	$	838	$	2,436	$	2,448

Peoples utilizes an incremental borrowing rate to determine the present value of lease payments for each lease, as the lease agreements do not provide an implicit rate. The estimated incremental borrowing rate reflects a secured rate and is based on the term of the lease and the interest rate environment at the lease commencement or remeasurement date.

The following table details the ROU assets, the lease liabilities and other information related to Peoples' operating leases at the dates shown:


(Dollars in thousands)	September 30, 2023			December 31, 2022
ROU assets:
Other assets	$	12,102		$	6,825
Lease liabilities:
Accrued expenses and other liabilities	$	12,490		$	7,551
Other information:
Weighted-average remaining lease term	9.3 years			8.8 years
Weighted-average discount rate	3.32		%	2.70		%

During the three months ended September 30, 2023 and 2022, Peoples paid cash of $0.8 million and $0.7 million, respectively, for operating leases. During the nine months ended September 30, 2023 and 2022, Peoples paid cash of $2.2 million and $1.9 million, respectively, for operating leases.

The following table summarizes the maturity of remaining lease liabilities:


(Dollars in thousands)	Balance
Remaining three months ending December 31, 2023	$	909
Year ending December 31, 2024	2,551
Year ending December 31, 2025	1,983
Year ending December 31, 2026	1,710
Year ending December 31, 2027	1,555
Thereafter	6,601
Total undiscounted lease payments	$	15,309
Imputed interest	$	(2,819)
Total lease liabilities	$	12,490

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis (“MD&A”) represents an overview of the results of operations and financial condition of Peoples for the three months and the nine months ended September 30, 2023 and September 30, 2022. This MD&A should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the Notes thereto.

Certain statements in this Form 10-Q, which are not historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by the fact they are not historical facts and include words such as "anticipate," "estimate," "may," "feel," "expect," "believe," "plan," "will," "will likely," "would," "should," "could," "project," "goal," "target," "potential," "seek," "intend," "continue," "remain," and similar expressions.

These forward-looking statements reflect management's current expectations based on all information available to management and its knowledge of Peoples' business and operations. Additionally, Peoples' financial condition, results of operations, plans, objectives, future performance and business are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, but are not limited to:

(1)ongoing increasing interest rate policies, changes in the interest rate environment due to economic conditions and/or the fiscal and monetary policy measures undertaken by the U.S. government and the Federal Reserve Board, including changes in the Federal Funds Target Rate, in response to such economic conditions, which may adversely impact interest rates, the interest rate yield curve, interest margins, loan demand and interest rate sensitivity;

(2)the effects of inflationary pressures and the impact of rising interest rates on borrowers’ liquidity and ability to repay;

(3)the success, impact, and timing of the implementation of Peoples' business strategies and Peoples' ability to manage strategic initiatives, including the ongoing increasing interest rate policies of the Federal Reserve Board, the completion and successful integration of planned acquisitions, including the recently-completed acquisition of Vantage and the Limestone Merger, and the expansion of commercial and consumer lending activities;

(4)competitive pressures among financial institutions, or from non-financial institutions, which may increase significantly, including product and pricing pressures, which can in turn impact Peoples' credit spreads, changes to third-party relationships and revenues, changes in the manner of providing services, customer acquisition and retention pressures, and Peoples' ability to attract, develop and retain qualified professionals;

(5)uncertainty regarding the nature, timing, cost, and effect of legislative or regulatory changes or actions, or deposit insurance premium levels, promulgated and to be promulgated by governmental and regulatory agencies in the State of Ohio, the FDIC, the Federal Reserve Board and the Consumer Financial Protection Bureau, including the FDIC’s recently issued notice of proposed rulemaking for a special assessment to recover the uninsured deposit losses from recent bank failures that adversely affect their respective businesses, which may subject Peoples, its subsidiaries, or one or more acquired companies to a variety of new and more stringent legal and regulatory requirements;

(6)potential adverse impacts as a result of the Inflation Reduction Act of 2022, which may negatively impact Peoples' operations and financial results;

(7)the effects of easing restrictions on participants in the financial services industry;

(8)current and future local, regional, national and international economic conditions (including the impact of persistent inflation, supply chain issues or labor shortages, supply-demand imbalances affecting local real estate prices, high unemployment rates in the local or regional economies in which Peoples operates and/or the U.S. economy generally, ineffective management of the U.S. federal budget or debt, potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other changes in trade regulations, and changes in the relationship of the U.S. and U.S. global trading partners) and the impact these conditions may have on Peoples, Peoples' customers and Peoples' counterparties, and Peoples' assessment of the impact, which may be different than anticipated;

(9)Peoples may issue equity securities in connection with future acquisitions, which could cause ownership and economic dilution to Peoples' current shareholders;

(10)changes in prepayment speeds, loan originations, levels of nonperforming assets, delinquent loans, charge-offs, and customer and other counterparties' performance and creditworthiness generally, which may be less favorable than expected in light of recent inflationary pressures and continued elevated interest rates, and may adversely impact the amount of interest income generated;

(11)Peoples may have more credit risk and higher credit losses to the extent there are loan concentrations by location or industry of borrowers or collateral;

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(12)future credit quality and performance, including expectations regarding future credit losses and the allowance for credit losses;

(13)changes in accounting standards, policies, estimates or procedures may adversely affect Peoples' reported financial condition or results of operations;

(14)the impact of assumptions, estimates and inputs used within models, which may vary materially from actual outcomes, including under the CECL model;

(15)the replacement of the London Interbank Offered Rate ("LIBOR") with other reference rates which may result in increased expenses and litigation, and adversely impact the effectiveness of hedging strategies;

(16)adverse changes in the conditions and trends in the financial markets, including recent inflationary pressures, which may adversely affect the fair value of securities within Peoples' investment portfolio, the interest rate sensitivity of Peoples' consolidated balance sheet, and the income generated by Peoples' trust and investment activities;

(17)the volatility from quarter to quarter of mortgage banking income, whether due to interest rates, demand, the fair value of mortgage loans, or other factors;

(18)Peoples' ability to receive dividends from Peoples' subsidiaries;

(19)Peoples' ability to maintain required capital levels and adequate sources of funding and liquidity;

(20)the impact of larger or similar-sized financial institutions encountering problems, such as the closures earlier in 2023 of Silicon Valley Bank in California, Signature Bank in New York, First Republic Bank in California, and Heartland Tri-State Bank in Kansas, which may adversely affect the banking industry and/or Peoples' business generation and retention, funding and liquidity, including potential increased regulatory requirements, and increased reputational risk and potential impacts to macroeconomic conditions;

(21)in light of the recent bank failures, Peoples' continued ability to grow deposits or maintain adequate deposit levels may be adversely impacted, and Peoples may experience an unexpected outflow of uninsured deposits, which may require Peoples to sell investment securities at a loss;

(22)Peoples' ability to secure confidential information and deliver products and services through the use of computer systems and telecommunications networks, including those of Peoples' third-party vendors and other service providers, which may prove inadequate, and could adversely affect customer confidence in Peoples and/or result in Peoples incurring a financial loss;

(23)any misappropriation of the confidential information which Peoples possesses could have an adverse impact on Peoples' business and could result in regulatory actions, litigation and other adverse effects;

(24)Peoples' ability to anticipate and respond to technological changes, and Peoples' reliance on, and the potential failure of, a number of third-party vendors to perform as expected, including Peoples' primary core banking system provider, which can impact Peoples' ability to respond to customer needs and meet competitive demands;

(25)operational issues stemming from and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems on which Peoples and Peoples' subsidiaries are highly dependent;

(26)changes in consumer spending, borrowing and saving habits, whether due to changes in retail distribution strategies, consumer preferences and behavior, changes in business and economic conditions, legislative or regulatory initiatives, or other factors, which may be different than anticipated;

(27)the adequacy of Peoples' internal controls and risk management program in the event of changes in strategic, reputational, market, economic, operational, cybersecurity, compliance, legal, asset/liability repricing, liquidity, credit and interest rate risks associated with Peoples' business;

(28)the impact on Peoples' businesses, personnel, facilities, or systems, of losses related to acts of fraud, theft, misappropriation or violence;

(29)the impact on Peoples' businesses, as well as on the risks described above, of various domestic or international widespread natural or other disasters, pandemics, cybersecurity attacks, system failures, civil unrest, military or terrorist activities or international conflicts (including Russia’s war in Ukraine and the recent conflicts involving Israel and Hamas);

(30)the potential further deterioration of the U.S. economy due to financial, political or other shocks;

(31)the potential influence on the U.S. financial markets and economy from the effects of climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs;

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(32)the impact on Peoples' businesses and operating results of any costs associated with obtaining rights in intellectual property claimed by others and adequately protecting Peoples' intellectual property;

(33)risks and uncertainties associated with Peoples' entry into new geographic markets and risks resulting from Peoples' inexperience in these new geographic markets;

(34)Peoples' ability to integrate the Limestone Merger, which may be unsuccessful, or may be more difficult, time-consuming or costly than expected;

(35)the risk that expected revenue synergies and cost savings from the Limestone Merger, may not be fully realized or realized within the expected time frame;

(36)changes in laws or regulations imposed by Peoples' regulators impacting Peoples' capital actions, including dividend payments and share repurchases;

(37)the vulnerability of Peoples' network and online banking portals, and the systems of parties with whom Peoples contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches;

(38)Peoples' business may be adversely affected by increased political and regulatory scrutiny of corporate environmental, social and governance ("ESG") practices;

(39)the effect of a fall in stock market prices on the asset and wealth management business; and

(40)other risk factors relating to the banking industry or Peoples as detailed from time to time in Peoples' reports filed with the Securities and Exchange Commission (the "SEC"), including those risk factors included in the disclosures under the heading "ITEM 1A. RISK FACTORS" of Peoples' 2022 Form 10-K, under the heading "Item 1A. RISK FACTORS" in Part II of Peoples' Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023 and June 30, 2023 and under the heading "ITEM 1A. RISK FACTORS" in Part II of this Form 10-Q. Peoples encourages readers of this Form 10-Q to understand forward-looking statements to be strategic objectives rather than absolute targets of future performance. Peoples undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the filing of this Form 10-Q or to reflect the occurrence of unanticipated events, except as required by applicable legal requirements. Copies of documents filed with the SEC are available free of charge at the SEC's website at http://www.sec.gov and/or from Peoples' website – www.peoplesbancorp.com under the “Investor Relations” section.

All forward-looking statements speak only as of the filing date of this Form 10-Q and are expressly qualified in their entirety by the cautionary statements. Although management believes the expectations in these forward-looking statements are based on reasonable assumptions within the bounds of management’s knowledge of Peoples’ business and operations, it is possible that actual results may differ materially from these projections.

This discussion and analysis should be read in conjunction with the Audited Consolidated Financial Statements, and Notes to the Audited Consolidated Financial Statements, contained in Peoples’ 2022 Form 10-K, as well as the Unaudited Condensed Consolidated Financial Statements, Notes to the Unaudited Condensed Consolidated Financial Statements, ratios, statistics and discussions contained elsewhere in this Form 10-Q.

Business Overview

The following discussion and analysis of Peoples’ Unaudited Condensed Consolidated Financial Statements is presented to provide insight into management’s assessment of the financial condition and results of operations.

Peoples is a diversified financial services holding company that makes available a complete line of banking, trust and investment, insurance, premium financing and equipment leasing solutions through its subsidiaries. Peoples provides services through traditional offices, automated teller machines ("ATMs"), mobile banking, telephone and internet-based banking. Peoples offers a complete array of insurance products through Peoples Insurance, a subsidiary of Peoples Bank. Brokerage services are offered by Peoples exclusively through an unaffiliated registered broker-dealer located at Peoples Bank's offices. Peoples Bank offers insurance premium finance lending nationwide through its Peoples Premium Finance division. Peoples also offers lease financing through its North Star Leasing division and through Vantage, a subsidiary of Peoples Bank. As of September 30, 2023, Peoples had 149 locations, including 132 full-service bank branches in Ohio, Kentucky, West Virginia, Virginia, Washington D.C. and Maryland. Peoples Bank is subject to regulation and examination primarily by the Ohio Division of Financial Institutions (the "ODFI"), the FRB of Cleveland and the FDIC. Peoples Bank must also follow the regulations promulgated by the Consumer Financial Protection Bureau (the "CFPB"), which regulates consumer financial products and services and certain financial services providers. Peoples Insurance is subject to regulation by the Ohio Department of Insurance and the state insurance regulatory agencies of those states in which Peoples Insurance may do business.

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Critical Accounting Policies

The accounting and reporting policies of Peoples conform to US GAAP. The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements describes Peoples' significant accounting policies. Management has identified the accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to understanding Peoples’ Unaudited Condensed Consolidated Financial Statements, and MD&A at September 30, 2023, which have been disclosed in Peoples' 2022 Form 10-K and updated in "Note 1 Summary of Significant Accounting Policies" in this Form 10-Q. This MD&A should be read in conjunction with the policies disclosed in Peoples’ 2022 Form 10-K.

Summary of Recent Transactions and Events

The following is a summary of recent transactions and events that have impacted or are expected to impact Peoples’ results of operations or financial condition:

◦During the third quarter of 2023, Peoples terminated its pension plan by settling the remaining benefit obligation of $7.7 million. The pension plan had been closed to new entrants since January 1, 2010. Peoples recorded a settlement charge of $2.4 million in the third quarter of 2023 in relation to the termination of the pension plan. Peoples does not anticipate further expenses related to the termination.

◦On October 25, 2022, Peoples announced the Limestone Merger, a transaction valued at $177.9 million. The Limestone Merger closed as of the close of business on April 30, 2023. Peoples acquired Limestone's loan portfolio totaling $1.1 billion, $1.2 billion of deposits, $172.7 million of total investment securities, an aggregate of $93.7 million of short-term and long term borrowings, and $93.5 million of total cash and cash equivalents. Peoples also recorded preliminary goodwill in the amount of $62.1 million and other intangible assets of $27.7 million, which consisted of core deposit intangibles.

◦For the third quarter of 2023, Peoples incurred $4.4 million of acquisition-related expenses, compared to $10.7 million for the second quarter of 2023 and $0.3 million for the third quarter of 2022. For the first nine months of 2023, Peoples incurred $15.7 million of acquisition-related expenses compared to $2.3 million for the first nine months of 2022.The acquisition-related expenses in 2023 were primarily related to the Limestone Merger, while the acquisition-related expenses in 2022 were primarily related to the Vantage acquisition.

◦During the third quarter of 2023, Peoples recorded a provision for credit losses of $4.1 million, compared to a provision for credit losses of $8.0 million in the linked quarter and a provision for credit losses of $1.8 million in the third quarter of 2022. The provision for credit losses for the third quarter of 2023 was driven by (i) loan growth, (ii) an increase in net charge-offs, (iii) updates to our prepayment, curtailment and funding rates, and (iv) a deterioration in macro-economic conditions used within the CECL model, partially offset by the release of reserves on individually analyzed loans. The provision for credit losses in the linked quarter was due to a provision of $9.4 million for the non-purchased credit deteriorated loans acquired in the Limestone Merger, partially offset by the release of reserves of $1.7 million on individually analyzed loans and a recovery of $1.0 million due to improvements in macro-economic conditions. The provision for credit losses for the third quarter of 2022 was largely attributable to a deterioration of macro-economic conditions, partially offset by a release of reserves on individually analyzed loans. The provision for credit losses for the first nine months of 2023 was $13.9 million, compared to a recovery of credit losses of $5.8 million for the first nine months of 2022. The provision for credit losses during the first nine months of 2023 was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (ii) economic forecast deterioration, partially offset by a reduction in the reserves for individually analyzed loans and the use of updated loss drivers. The recovery of credit losses for the first nine months of 2022 was primarily due to the impact of economic assumptions used in the CECL model. For more information, please refer to the section titled "RESULTS OF OPERATIONS - Provision for (Recovery of) Credit Losses" found later in this discussion.

◦To combat the effects of ongoing inflationary pressures, the Federal Reserve Board increased the Federal Funds Target Rate range to 0.25% to 0.50% on March 16, 2022, to 0.75% to 1.00% on May 4, 2022, to 1.50% to 1.75% on June 15, 2022, to 2.25% to 2.50% on July 27, 2022, to 3.00% to 3.25% on September 21, 2022, to 3.75% to 4.00% on November 2, 2022, to 4.25% to 4.50% on December 14, 2022, to 4.50% to 4.75% on February 1, 2023, to 4.75% to 5.00% on March 22, 2023, to 5.00% to 5.25% on May 3, 2023, and to 5.25% to 5.50% on July 27, 2023 and has signaled it may raise rates again in 2023, if necessary to combat inflation.

The impact of these transactions and events, where material, is discussed in the applicable sections of this MD&A.

EXECUTIVE SUMMARY

Peoples reported net income of $31.9 million for the third quarter of 2023, representing earnings per diluted common share of $0.90. In comparison, Peoples reported net income of $21.1 million, representing earnings per diluted common share of $0.64, for the second quarter of 2023, and net income of $26.0 million, representing earnings per diluted common share of $0.92, for the third

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quarter of 2022. For the nine months ended September 30, 2023, Peoples recorded net income of $79.5 million, or $2.47 per diluted common share, compared to $74.4 million, or $2.65 per diluted common share, for the nine months ended September 30, 2022. Non-core items, and the related tax effect of each, in net income primarily included acquisition-related expenses and a $2.4 million pension settlement charge recognized in the third quarter of 2023. Non-core items negatively impacted earnings per diluted common share by $0.16 for the third quarter of 2023, $0.28 for the second quarter of 2023, and $0.01 for the third quarter of 2022. Non-core items negatively impacted earnings per diluted share by $0.52 and $0.07 for the nine months ended September 30, 2023 and 2022, respectively.

Net interest income was $93.3 million for the third quarter of 2023, an increase of $8.4 million, or 10%, compared to the linked quarter. The increase in net interest income was primarily due to a full quarter of net interest income provided by the Limestone Merger in the third quarter compared to only two months of net interest income in the linked quarter. Net interest margin was 4.70% for the third quarter of 2023, compared to 4.54% for the linked quarter. The increase in net interest margin was primarily driven by a full quarter of the accretion on the acquired Limestone portfolio compared to two months in the linked quarter. The increase in net interest margin was also impacted by a true-up of $3.6 million in the third quarter of 2023 to the preliminary Limestone-related accretion, $1.9 million of which would have benefited the second quarter of 2023. Also impacting the increases in net interest income and net interest margin was 6 basis points of improvement in investment yields due to sales of lower-yielding investment securities and a full quarter of yields from the securities acquired in the Limestone Merger compared to two months in the linked quarter. Partially offsetting these benefits was an increase in interest expense resulting from a shift in the composition of funding sources to retail and brokered CDs from non-interest bearing deposits, combined with an increase in market interest rates for deposits and other funding sources. Net interest income for the third quarter of 2023 increased $26.2 million, or 39%, compared to the third quarter of 2022. Net interest margin for the third quarter of 2023 increased 53 basis points compared to 4.17% for the third quarter of 2022. The increase in net interest income compared to the third quarter of 2022 was driven by increases in market interest rates, the Limestone Merger and organic growth. For the first nine months of 2023, net interest income increased $68.2 million, or 37%, compared to the first nine months of 2022, while net interest margin increased 79 basis points to 4.60%. The increase in net interest income was driven by increases in market interest rates, the additional net interest income from the Limestone Merger, and improvement in investment yields. Partially offsetting these benefits was an increase in interest expense resulting from a shift in the composition of funding sources combined with an increase in market interest rates for deposits and other funding sources.

Accretion income, net of amortization expense, from acquisitions was $9.8 million for the third quarter of 2023, $4.5 million for the second quarter of 2023 and $2.8 million for the third quarter of 2022, which added 49 basis points, 24 basis points and 16 basis points, respectively, to net interest margin. The increases in accretion income for the third quarter of 2023 when compared to the linked quarter and the third quarter of 2022 were driven by accretion from the Limestone Merger and the aforementioned third quarter 2023 true-up to the preliminary Limestone-related accretion. Accretion income, net of amortization expense, from acquisitions was $16.3 million for the nine months ended September 30, 2023, compared to $9.4 million for the nine months ended September 30, 2022, which added 30 and 20 basis points, respectively, to net interest margin. The increase in accretion income for the first nine months of 2023 compared to the same period in 2022 was due to higher accretion recognized from the Limestone Merger than was recorded due to the acquisitions of Vantage and NSL, and the merger with Premier in the prior period.

The provision for credit losses was $4.1 million for the third quarter of 2023, compared to a provision for credit losses of $8.0 million for the linked quarter and a provision for credit losses of $1.8 million for the third quarter of 2022. The provision for credit losses for the third quarter of 2023 was driven by (i) loan growth, (ii) an increase in net charge-offs, (iii) updates to our prepayment, curtailment and funding rates, and (iv) a deterioration in macro-economic conditions used within the CECL model, partially offset by the release of reserves on individually analyzed loans. The provision for credit losses for the linked quarter was due to a provision of $9.4 million for the non-purchased credit deteriorated loans acquired in the Limestone Merger, partially offset by the release of reserves of $1.7 million on individually analyzed loans and a recovery of $1.0 million due to improvements in macro-economic conditions. The provision for credit losses for the third quarter of 2022 was largely attributable to a deterioration of macro-economic conditions, partially offset by a release of reserves for individually analyzed loans. Net charge-offs for the third quarter of 2023 were $2.3 million, or 0.15% of average total loans annualized, compared to net charge-offs of $1.2 million, or 0.09% of average total loans annualized, for the linked quarter and net charge-offs of $1.7 million, or 0.15% of average total loans annualized, for the third quarter of 2022. For additional information on credit trends and the allowance for credit losses, see the "FINANCIAL CONDITION - Allowance for Credit Losses" section below.

The provision for credit losses for the first nine months of 2023 was $13.9 million, compared to a recovery of credit losses of $5.8 million for the first nine months of 2022. The provision for credit losses for the first nine months of 2023 was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (iii) economic forecast deterioration, partially offset by a reduction in the reserves for individually analyzed loans and the use of updated loss drivers. The recovery of credit losses for the first nine months of 2022 was primarily due to the impact of economic assumptions used in the CECL model. Net charge-offs for the first nine months of 2023 were $5.1 million, or 0.12% of average total loans annualized, compared to net charge-offs of $5.1 million, or 0.15% annualized, for the first nine months of 2022. For additional information on credit trends and the allowance for credit losses, see the "Asset Quality" section below.

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Net gains and losses include gains and losses on investment securities, asset disposals and other transactions, which are included in total non-interest income on the Consolidated Statements of Operations. The net loss realized during the third quarter of 2023 was $0.3 million, compared to a net loss of $1.8 million for the linked quarter, and a net loss of $14,000 for the third quarter of 2022. The net loss for the third quarter of 2023 was due to $0.3 million of net losses on repossessed assets. The net loss for the linked quarter was primarily due to the $1.6 million write-down of an OREO property due to a pending sale of the property. The net loss realized during the first nine months of 2023 was $4.3 million, compared to $207,000 for the first nine months of 2022. The net loss for the first nine months of 2023 was primarily driven by the $2.0 million pre-tax ($1.6 million after-tax) net loss on the sales of the available-for-sale investment securities during the first quarter of 2023, as mentioned above, and the $1.6 million write-down of the OREO property during the second quarter of 2023, as mentioned above. The net loss recognized in the first nine months of 2022 was attributable to (i) a $119,000 loss recorded on repossessed assets, (ii) a $44,000 loss on the sale of investment securities in order to reinvest into higher-yielding securities and (iii) an adjustment to the gain on sale of loans recognized in the fourth quarter of 2021 due to a measurement period adjustment to the acquisition-date fair value of Premier loans acquired that were subsequently sold.

Total non-interest income, excluding net gains and losses, for the third quarter of 2023 increased $0.7 million compared to the linked quarter. The increase in non-interest income, excluding net gains and losses, was due to a $1.4 million increase in other non-interest income and a $0.5 million increase in bank owned life insurance income, mostly offset by a $1.8 million decrease in lease income. The increase in other non-interest income was attributable to a $1.0 million increase in operating lease income, which was partially offset by a $0.6 million increase in operating lease expense recognized in other non-interest expense when compared to the linked quarter. Compared to the third quarter of 2022, non-interest income, excluding net gains and losses, increased $3.1 million, due to (i) a $1.5 million increase in other non-interest income, (ii) a $1.2 million increase in electronic banking income, (iii) a $0.7 million increase in deposit account service charges, (iv) a $0.7 million increase in bank owned life insurance income, and (v) a $0.6 million increase in insurance income. The increase in other non-interest income was due to the increase in operating lease income mentioned above. Insurance income increased due to new business and market increases for premiums. The other increases were primarily due to the additional customers brought in from the Limestone Merger when compared to the third quarter of 2022.

For the first nine months of 2023, total non-interest income, excluding gains and losses, increased $7.6 million, or 13%, compared to the first nine months of 2022. The increase was driven by (i) a $2.4 million increase in electronic banking income, (ii) a $1.7 million increase in insurance income due to growth in the property and casualty insurance line, (iii) a $1.4 million increase in deposit account service charges, (iv) a $1.4 million increase in other non-interest income, and (v) a $1.0 million increase in bank owned life insurance income. The increase in other non-interest income was due to the increase in operating lease income mentioned above. Insurance income increased due to new business and market increases for premiums. The other increases were primarily due to the additional customers brought in from the Limestone Merger when compared to the first nine months of 2022.

Total non-interest expenses for the third quarter and the nine months ended September 30, 2023 were impacted by the Limestone Merger and acquisition-related non-interest expenses. Total acquisition-related non-interest expenses added $4.4 million and $15.7 million, respectively, across various line-items within non-interest expense. During the third quarter of 2023, the acquisition-related expenses recognized were primarily attributable to early contract termination fees, system conversion costs, salaries and employee benefit costs, and professional fees attributable to the Limestone Merger. For the second quarter of 2023, the acquisition-related non-interest expenses were primarily attributable to salaries and employee benefit costs and professional fees related to the Limestone Merger.

The table below summarizes the amount of acquisition-related expenses for each line item that is a component of non-interest expense. This information is used by Peoples to provide information useful to investors in understanding Peoples' operating performance and trends.

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	Three Months Ended						Nine Months Ended
	September 30,		June 30,		September 30,		September 30,
(Dollars in thousands)	2023		2023		2022		2023		2022
Non-interest expense:
Salaries and employee benefit costs	$	36,608	$	38,025	$	28,618	$	106,661	$	83,932
Net occupancy and equipment expense	5,501		5,380		4,813		15,836		14,669
Professional fees	3,456		7,438		2,832		13,775		8,784
Data processing and software expense	6,288		4,728		3,279		15,578		9,228
Amortization of other intangible assets	3,280		2,800		2,023		7,951		5,765
Electronic banking expense	1,836		1,832		2,648		5,159		8,134
Marketing expense	1,267		1,357		1,136		3,554		2,991
FDIC insurance premiums	1,260		1,464		709		3,525		2,921
Franchise tax expense	772		872		1,075		2,678		2,941
Communication expense	752		724		599		2,089		1,873
Other loan expenses	856		538		511		2,133		1,788
Other non-interest expense	9,820		5,465		4,010		19,859		10,755
Total non-interest expense	71,696		70,623		52,253		198,798		153,781
Acquisition-related non-interest expense:
Salaries and employee benefit costs	562		5,125		—		5,708		29
Net occupancy and equipment expense	2		20		7		31		36
Professional fees	429		4,812		221		5,532		1,791
Data processing and software expense	1,289		1		129		1,290		410

Electronic banking expense	—		115		—		115		(92)
Marketing expense	38		14		5		61		45


Communication expense	1		—		—		1		1
Other loan expenses	—		1		—		1		—
Other non-interest expense	2,113		621		(23)		2,955		94
Total acquisition-related non-interest expense	4,434		10,709		339		15,694		2,314
Non-interest expense excluding acquisition-related expense:
Salaries and employee benefit costs	36,046		32,900		28,618		100,953		83,903
Net occupancy and equipment expense	5,499		5,360		4,806		15,805		14,633
Professional fees	3,027		2,626		2,611		8,243		6,993
Data processing and software expense	4,999		4,727		3,150		14,288		8,818
Amortization of other intangible assets	3,280		2,800		2,023		7,951		5,765
Electronic banking expense	1,836		1,717		2,648		5,044		8,226
Marketing expense	1,229		1,343		1,131		3,493		2,946
FDIC insurance premiums	1,260		1,464		709		3,525		2,921
Franchise tax expense	772		872		1,075		2,678		2,941
Communication expense	751		724		599		2,088		1,872
Other loan expenses	856		537		511		2,132		1,788
Other non-interest expense	7,707		4,844		4,033		16,904		10,661
Total non-interest expense excluding acquisition-related expense	$	67,262	$	59,914	$	51,914	$	183,104	$	151,467

Total non-interest expense increased $1.1 million, or 2%, for the three months ended September 30, 2023, compared to the linked quarter. Excluding acquisition-related expense, total non-interest expense increased $7.3 million, or 12%, primarily due to increases of (i) $3.1 million in salaries and employee benefit costs, (ii) $2.9 million in other non-interest expense, (iii) $0.5 million in amortization of other intangible assets, and (iv) $0.4 million in professional fees. The increases in the third quarter of 2023 total non-interest expenses when compared to the linked quarter were due to a full quarter of expenses in the third quarter from the Limestone Merger compared to only two months of expenses in the linked quarter. Excluding the impact from the Limestone Merger, the increase in other non-interest expenses was also due to the previously discussed pension plan settlement charge as well as a $0.6 million increase

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in operating lease depreciation expenses. The increases in salaries and employee benefit costs and data processing and professional fees were primarily due to growth.

Compared to the third quarter of 2022, total non-interest expense for the third quarter of 2023 increased $19.4 million, or 37%. Excluding acquisition-related expenses, non-interest expenses increased $15.3 million, or 30%, primarily due to a $7.4 million increase in salaries and employee benefit costs, a $3.7 million increase in other non-interest expense, a $1.8 million increase in data processing and software expense, and a $1.3 million increase in amortization of other intangible assets. The increases were primarily due to total non-interest expenses attributable to the Limestone Merger, excluding acquisition-related expense. The increase in other non-interest expenses was also impacted by the previously discussed pension plan settlement charges and a $0.9 million increase in operating lease depreciation expenses. The increases in salaries and employee benefit costs and in data processing and software expense, excluding non-acquisition-related expenses attributable to the Limestone Merger, were due to growth.

For the nine months ended September 30, 2023, total non-interest expense increased $45.0 million, or 29.3%, compared to the first nine months of 2022. Excluding acquisition-related expenses, non-interest expenses increased $31.6 million, or 20.9%. This variance was driven by increases of $17.1 million, $6.2 million, $5.5 million and $2.2 million in salaries and employee benefit costs, other non-interest expense, data processing and software expense and amortization of other intangible assets, respectively, partially offset by a $3.2 million decrease in electronic banking expense. The increases were impacted by total non-interest expenses attributable to the Limestone Merger, excluding acquisition-related expenses, which impacted various non-interest expense line items. The increase in other non-interest expenses was also impacted by the previously discussed pension plan settlement charges and a $1.1 million increase in operating lease depreciation expenses, while the other increases were also impacted by growth.

The efficiency ratio for the third quarter of 2023 was 58.4%, compared to 62.7% for the linked quarter, and 57.2% for the third quarter of 2022. The decrease in the efficiency ratio compared to the linked quarter was primarily due to higher net interest income due to an increase in market interest rates and a full quarter with the additional customers from the Limestone Merger compared to two months in the linked quarter and less acquisition-related expenses, partially offset by an increase in non-acquisition-related non-interest expenses. The increase in the efficiency ratio compared to the prior year quarter was primarily due to the increases in non-interest expenses, primarily from the Limestone Merger, which was mostly offset by higher net interest income due to increases in the market interest rates and additional customers from the Limestone Merger. The efficiency ratio, adjusted for non-core items, was 52.5% for the third quarter of 2023, compared to 53.3% for the linked quarter and 56.6% for the third quarter of 2022. Peoples continues to focus on controlling expenses, while recognizing necessary costs in order to continue growing the business.

Peoples recorded income tax expense of $8.8 million with an effective tax rate of 21.7% for the third quarter of 2023, compared to income tax expense of $6.2 million with an effective tax rate of 22.6% for the linked quarter, and income tax expense of $7.4 million with an effective tax rate of 22.2% for the third quarter of 2022. Income tax expense for the third quarter of 2023 compared to the linked quarter and third quarter of 2022, increased due to higher net income before income taxes. The effective rate decrease for the third quarter of 2023 when compared to the linked quarter and the third quarter of 2022 was primarily due to updates to the blended state tax rate. Peoples recorded income tax expense of $22.1 million with an effective tax rate of 21.7% in the first nine months of 2023 and $20.2 million with an effective tax rate of 21.4% in the first nine months of 2022. The increase in income tax expense for the first nine months of 2023 when compared to the same 2022 period was driven by higher pre-tax income.

At September 30, 2023, total assets were $8.94 billion, compared to $8.79 billion at June 30, 2023, $7.21 billion at December 31, 2022 and $7.01 billion at September 30, 2022. Total assets at September 30, 2023 increased when compared to at June 30, 2023 primarily due to an increase in interest-bearing deposits in other banks, mostly with the FRB, and an increase in period-end total loan and lease balances. The period-end total loan and lease balances at September 30, 2023 increased $109.8 million, or 7% annualized, compared to at June 30, 2023. The increase in the period-end loan and lease balance was primarily driven by increases of (i) $118.5 million in other commercial real estate loans, (ii) $26.9 million in premium finance loans and (iii) $24.8 million in leases, partially offset by decreases of (i) $44.7 million in construction loans and (ii) $31.5 million in commercial and industrial loans. Total assets at September 30, 2023 increased compared to December 31, 2022 and September 30, 2022 due to $1.51 billion of assets, primarily loans, acquired in the Limestone Merger. Excluding the loans acquired in the Limestone Merger, the period-end loan and lease balance at September 30, 2023 increased $358.6 million, or 10% annualized, compared to at December 31, 2022, driven by increases of $182.8 million, $57.5 million, $48.4 million, $38.9 million and $30.1 million in other commercial real estate loans, leases, construction loans, indirect consumer loans, and premium finance loans, respectively. These increases were partially offset by a decrease of $13.1 million in consumer residential real estate loans. The increase in total assets from at December 31, 2022 was also impacted by purchases of held-to-maturity investment securities. Management purchased these securities to increase portfolio yield and reduce Peoples' sensitivity to falling intermediate and long-term interest rates. Excluding the loans acquired in the Limestone Merger, period-end loan and lease balance at September 30, 2023 increased $454.6 million, or 10% annualized, compared to at September 30, 2022 primarily due to increases of $182.9 million, $89.8 million, $79.8 million, $76.1 million and $21.6 million in other commercial real estate loans, leases, construction loans, indirect consumer loans, and premium finance loans, respectively. These increases were partially offset by a reduction of $23.1 million in consumer residential real estate loans.

Total liabilities were $7.95 billion at September 30, 2023, up from $7.79 billion at June 30, 2023, $6.42 billion at December 31, 2022 and $6.25 billion at September 30, 2022. The increase in total liabilities when compared to at June 30, 2023 was primarily due to an increase of $77.6 million, or 1%, in period-end total deposits. The increase in period-end total deposits when compared to at

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June 30, 2023 was primarily driven by increases of (i) $248.0 million in retail CDs, (ii) $56.0 million in governmental deposits and (iii) $49.0 million in brokered deposits, which are primarily used as a source of funding, partially offset by decreases of (a) $129.5 million in savings accounts, (c) $113.5 million in non-interest-bearing demand deposit accounts, and (c) $44.6 million in interest-bearing demand deposit accounts. The increase in governmental deposit accounts was due to the seasonality of the balances, which are typically higher in the first quarter and third quarter of each year. The increases in total liabilities when compared to at December 31, 2022 and at September 30, 2022 were primarily due to $1.14 billion of liabilities, primarily deposits, acquired in the Limestone Merger. Excluding the deposits acquired in the Limestone Merger, period-end total deposits at September 30, 2023 increased $399.8 million, or 7%, compared to at December 31, 2022, primarily due to increases of $483.3 million in brokered CDs and of $444.1 million in retail CDs, partially offset by decreases of $203.5 million, $180.6 million, and $174.0 million in non-interest bearing deposits, savings accounts, and interest-bearing demand deposit accounts, respectively. Excluding deposits acquired in the Limestone Merger, period-end total deposits at September 30, 2023 increased $251.1 million, or 4%, compared to at September 30, 2022. The increase was primarily driven by increases of $522.8 million in brokered deposits and $429.6 million in retail CDs, partially offset by decreases of $250.0 million, $189.5 million, $175.9 million and $78.8 million in non-interest-bearing demand deposit accounts, savings accounts, interest-bearing demand deposit accounts, and governmental deposit accounts, respectively.

Total stockholders' equity at September 30, 2023 decreased by $5.7 million compared to at June 30, 2023, which was primarily due to an increase in accumulated other comprehensive loss of $24.9 million and dividends paid of $13.8 million, partially offset by net income for the third quarter of 2023 of $31.9 million. The change in accumulated other comprehensive loss was primarily the result of the changes in the market value of available-for-sale investment securities during the period. Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $148.1 million and $121.5 million at September 30, 2023 and at June 30, 2023, respectively. Total stockholders' equity at September 30, 2023 increased by $207.9 million and $232.7 million compared to at December 31, 2022 and at September 30, 2022, respectively, primarily due to 6.8 million common shares issued in the Limestone Merger. The increase in total stockholders' equity at September 30, 2023 when compared to at December 31, 2022 was also impacted by net income for the first nine months of 2023 of $79.5 million, partially offset by dividends paid of $37.9 million and an increase in accumulated other comprehensive loss of $16.7 million. Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $129.9 million at December 31, 2022. The increase in total stockholders' equity at September 30, 2023 when compared to at September 30, 2022 was also impacted by net income of $106.4 million in the last twelve months, partially offset by dividends paid of $48.7 million and an increase in accumulated other comprehensive loss of $8.9 million. The increase in accumulated other comprehensive loss was the result of an increase of $10.0 million in unrealized losses related to the available-for-sale investment securities portfolio from September 30, 2022 to September 30, 2023, partially offset by the realization of $2.4 million of pre-tax accumulated losses for the pension plan when it was terminated during the third quarter of 2023. Accumulated unrealized losses related to the available-for-sale investment securities portfolio were $138.1 million at September 30, 2022.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income, the amount by which interest income exceeds interest expense, remains Peoples' largest source of revenue. The amount of net interest income earned by Peoples each quarter is affected by various factors, including changes in market interest rates due to the Federal Reserve’s monetary policy, the level and degree of pricing competition for loans and deposits in Peoples’ markets, and the amount and composition of Peoples' earning assets and interest-bearing liabilities.

Net interest margin, which is calculated by dividing fully tax-equivalent ("FTE") net interest income by average interest-earning assets, serves as an important measurement of the net revenue stream generated by the volume, mix and pricing of interest-earning assets and interest-bearing liabilities. FTE net interest income is calculated by increasing interest income to convert tax-exempt income earned on obligations of states and political subdivisions and tax-exempt loans to the pre-tax equivalent of taxable income using a blended corporate income tax rate of 23.3% for the three months and the nine months ended September 30, 2023, 23.6% for the three months ended June 30, 2023, and 23.3% for the three months and the nine months ended September 30, 2022.

The following table details the calculation of FTE net interest income:


	Three Months Ended						Nine Months Ended
	September 30, 2023		June 30, 2023		September 30, 2022		September 30,
(Dollars in thousands)							2023		2022
Net interest income	$	93,274	$	84,853	$	67,051	$	251,005	$	182,829
Taxable equivalent adjustment	444		446		387		1,289		1,116
FTE net interest income	$	93,718	$	85,299	$	67,438	$	252,294	$	183,945

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The following tables detail Peoples’ average balance sheets for the periods presented:


	For the Three Months Ended
	September 30, 2023						June 30, 2023						September 30, 2022
(Dollars in thousands)	Average Balance		Income/ Expense		Yield/Cost		Average Balance		Income/ Expense		Yield/Cost		Average Balance		Income/ Expense		Yield/Cost
Short-term investments	$	62,609	$	801	5.08	%	$	58,245	$	673	4.63	%	$	159,522	$	847	2.11	%

Investment securities (a)(b):
Taxable	1,626,342		12,682		3.12	%	1,673,441		12,817		3.06	%	1,483,984		7,604		2.05	%
Nontaxable	192,906		1,480		3.07	%	200,503		1,477		2.95	%	201,150		1,405		2.79	%
Total investment securities	1,819,248		14,162		3.11	%	1,873,944		14,294		3.05	%	1,685,134		9,009		2.13	%
Loans (b)(c):
Construction	400,396		9,983		9.76	%	358,732		6,491		7.16	%	222,966		2,765		4.85	%
Commercial real estate, other	1,965,927		34,369		6.84	%	1,735,466		28,240		6.44	%	1,300,173		16,593		4.99	%
Commercial and industrial	1,128,420		22,568		7.83	%	1,069,529		19,569		7.24	%	865,436		11,140		5.04	%
Premium finance	179,390		3,565		7.78	%	154,557		2,659		6.81	%	162,057		1,949		4.71	%
Leases	384,606		11,508		11.71	%	359,016		10,275		11.32	%	307,459		9,628		12.25	%
Residential real estate (d)	952,863		11,879		4.99	%	921,012		10,818		4.70	%	869,444		9,439		4.34	%
Home equity lines of credit	201,973		4,012		7.88	%	191,915		3,656		7.64	%	173,032		2,217		5.08	%
Consumer, indirect	662,462		8,774		5.25	%	651,669		7,942		4.89	%	576,826		5,907		4.06	%
Consumer, direct	139,595		2,416		6.87	%	123,899		2,246		7.27	%	113,609		1,764		6.16	%
Total loans	6,015,632		109,074		7.13	%	5,565,795		91,896		6.55	%	4,591,002		61,402		5.26	%
Allowance for credit losses	(60,724)						(53,427)						(52,719)
Net loans	5,954,908		109,074		7.20	%	5,512,368		91,896		6.62	%	4,538,283		61,402		5.33	%
Total earning assets	7,836,765		124,037		6.23	%	7,444,557		106,863		5.70	%	6,382,939		71,258		4.40	%
Goodwill and other intangible assets	411,229						387,055						329,482
Other assets	558,415						511,271						411,687
Total assets	$	8,806,409					$	8,342,883					$	7,124,108
Interest-bearing deposits:
Savings accounts	$	1,058,606	$	447	0.17	%	$	1,095,713	$	583	0.21	%	$	1,079,580	$	139	0.05	%
Governmental deposit accounts	758,409		4,012		2.10	%	693,725		2,330		1.35	%	741,836		543		0.29	%
Interest-bearing demand accounts	1,198,100		520		0.17	%	1,178,614		532		0.18	%	1,158,970		190		0.07	%
Money market accounts	717,765		2,943		1.63	%	679,123		2,006		1.18	%	623,144		292		0.19	%
Retail CDs	1,043,579		7,161		2.72	%	825,155		4,209		2.05	%	560,532		644		0.46	%
Brokered CDs (e)	631,410		7,399		4.65	%	480,640		4,743		3.96	%	86,524		508		2.33	%
Total interest-bearing deposits	5,407,869		22,482		1.65	%	4,952,970		14,403		1.17	%	4,250,586		2,316		0.22	%
Borrowed funds:
Short-term FHLB advances (e)	344,978		4,717		5.42	%	387,543		4,938		5.11	%	41,696		266		2.53	%
Repurchase agreements and other	113,484		452		1.59	%	106,018		376		1.42	%	161,069		127		0.32	%
Total short-term borrowings	458,462		5,169		4.48	%	493,561		5,314		4.32	%	202,765		393		0.77	%
Long-term FHLB advances	60,486		521		3.42	%	33,819		205		2.43	%	34,727		212		2.42	%

Long-term notes payable	39,680		635		6.40	%	44,493		548		4.94	%	63,420		698		4.40	%
Other long-term borrowings (f)	48,068		1,512		12.31	%	53,779		1,094		8.05	%	13,735		201		5.73	%
Total long-term borrowings	148,234		2,668		7.19	%	132,091		1,847		5.56	%	111,882		1,111		3.97	%
Total borrowed funds	606,696		7,837		4.72	%	625,652		7,161		4.58	%	314,647		1,504		1.91	%
Total interest-bearing liabilities	6,014,565		30,319		1.96	%	5,578,622		21,564		1.55	%	4,565,233		3,820		0.33	%
Non-interest-bearing deposits	1,627,231						1,637,671						1,655,888
Other liabilities	159,755						175,152						105,128
Total liabilities	7,801,551						7,391,445						6,326,249


Total stockholders’ equity	1,004,858						951,438						797,859
Total liabilities and stockholders’ equity	$	8,806,409					$	8,342,883					$	7,124,108
Interest rate spread (b)			$	93,718	4.27	%			$	85,299	4.15	%			$	67,438	4.07	%
Net interest margin (b)					4.70	%					4.54	%					4.17	%

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	For the Nine Months Ended
	September 30, 2023						September 30, 2022
(Dollars in thousands)	Average Balance		Income/ Expense		Yield/Cost		Average Balance		Income/ Expense		Yield/Cost
Short-term investments	$	57,271	$	1,862	4.35	%	$	224,060	$	1,306	0.78	%

Investment securities (a)(b):
Taxable	1,632,594		36,548		2.98	%	1,488,609		20,712		1.86	%
Nontaxable	194,667		4,255		2.91	%	199,515		3,991		2.67	%
Total investment securities	1,827,261		40,803		2.98	%	1,688,124		24,703		1.95	%
Loans (b)(c):
Construction	333,895		20,437		8.07	%	219,478		7,136		4.29	%
Commercial real estate, other	1,671,019		82,403		6.50	%	1,338,375		46,974		4.63	%
Commercial and industrial	1,021,573		56,747		7.33	%	872,601		27,878		4.21	%
Premium finance	160,729		8,374		6.87	%	146,345		4,891		4.41	%
Leases	362,222		31,426		11.44	%	253,231		26,271		13.68	%
Residential real estate (d)	903,622		32,414		4.78	%	890,499		28,531		4.27	%
Home equity lines of credit	190,225		10,634		7.47	%	168,137		5,577		4.43	%
Consumer, indirect	651,578		23,947		4.91	%	547,438		16,195		3.96	%
Consumer, direct	125,826		6,401		6.80	%	110,509		5,006		6.06	%
Total loans	5,420,689		272,783		6.66	%	4,546,613		168,459		4.91	%
Allowance for credit losses	(55,757)						(56,237)
Net loans	5,364,932		272,783		6.73	%	4,490,376		168,459		4.97	%
Total earning assets	7,249,464		315,448		5.76	%	6,402,560		194,468		4.03	%
Goodwill and other intangible assets	374,924						321,043
Other assets	496,497						380,376
Total assets	$	8,120,885					$	7,103,979
Interest-bearing deposits:
Savings accounts	$	1,066,783	$	1,166	0.15	%	$	1,068,912	$	218	0.03	%
Governmental deposit accounts	696,359		7,408		1.42	%	705,891		1,462		0.28	%
Interest-bearing demand accounts	1,160,698		1,232		0.14	%	1,169,284		397		0.05	%
Money market accounts	661,272		5,774		1.17	%	638,061		492		0.10	%
Retail CDs	817,512		13,120		2.15	%	596,335		2,262		0.51	%
Brokered CDs (e)	452,574		13,846		4.09	%	88,336		1,552		2.35	%
Total interest-bearing deposits	4,855,198		42,546		1.17	%	4,266,819		6,383		0.20	%
Borrowed funds:
Short-term FHLB advances (e)	373,304		13,969		5.00	%	50,132		816		2.18	%
Repurchase agreements and other	104,522		971		1.24	%	119,228		176		0.20	%
Total short-term borrowings	477,826		14,940		4.18	%	169,360		992		0.78	%
Long-term FHLB advances	42,870		930		2.90	%	59,440		775		1.74	%

Long-term notes payable	44,903		1,837		5.45	%	57,989		1,900		4.37	%
Other long-term borrowings (f)	38,676		2,901		9.89	%	13,700		473		4.55	%
Total long-term borrowings	126,449		5,668		5.98	%	131,129		3,148		3.20	%
Total borrowed funds	604,275		20,608		4.14	%	300,489		4,140		1.83	%
Total interest-bearing liabilities	5,459,473		63,154		1.50	%	4,567,308		10,523		0.31	%
Non-interest-bearing deposits	1,607,411						1,637,053
Other liabilities	134,003						91,749
Total liabilities	7,200,887						6,296,110


Total stockholders’ equity	919,998						807,869
Total liabilities and stockholders’ equity	$	8,120,885					$	7,103,979
Interest rate spread (b)			$	252,294	4.26	%			$	183,945	3.72	%
Net interest margin (b)					4.60	%					3.81	%

(a)Average balances are based on carrying value.

(b)Interest income and yields are presented on an FTE basis, using a 23.3% blended corporate income tax rate for the three months and the nine months ended September 30, 2023, 23.6% for the three months ended June 30, 2023, and 23.3% for the three months and the nine months ended September 30, 2022.

(c)Average balances include nonaccrual and impaired loans. Interest income includes interest earned and received on nonaccrual loans prior to the loans being placed on nonaccrual status. Loan fees included in interest income were immaterial for all periods presented.

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(d)Loans held for sale are included in the average loan balance listed. Related interest income on loans originated for sale prior to the loan being sold is included in loan interest income.

(e)Interest related to interest rate swap transactions is included, as appropriate to the transaction, in interest expense on short-term FHLB advances and interest expense on brokered CDs for the periods presented in which FHLB advances and brokered CDs were being utilized.

(f)Included in other long-term borrowings are trust preferred securities held for investments and floating rate junior subordinated deferrable interest debentures.

Peoples' average balances compared to prior periods have been impacted by recent acquisitions, including the Limestone Merger as of the close of business on April 30, 2023, which added to average loan, deposit and borrowed funds balances. Peoples' cash balances have increased primarily due to an increase in interest-bearing deposits in other banks, mostly with the FRB. The increases in market interest rates have increased asset yields and deposit outflows (which have increased borrowings).

The following table provides an analysis of the changes in FTE net interest income:




	Three Months Ended September 30, 2023 Compared to												Nine Months Ended September 30, 2023 Compared to
(Dollars in thousands)	June 30, 2023						September 30, 2022						September 30, 2022
Increase (decrease) in:	Rate		Volume		Total (a)		Rate		Volume		Total (a)		Rate		Volume		Total (a)
INTEREST INCOME:
Short-term investments	$	702	$	(574)	$	128	$	2,816	$	(2,862)	$	(46)	$	2,723	$	(2,167)	$	556

Investment Securities (b):
Taxable	1,049		(1,184)		(135)		4,287		791		5,078		(163)		15,999		15,836
Nontaxable	247		(244)		3		395		(320)		75		255		9		264
Total investment income	1,296		(1,428)		(132)		4,682		471		5,153		92		16,008		16,100
Loans (b):
Construction	2,676		816		3,492		4,038		3,180		7,218		8,362		4,939		13,301
Commercial real estate, other	1,410		4,719		6,129		7,455		10,321		17,776		21,955		13,474		35,429
Commercial and industrial	1,492		1,507		2,999		7,364		4,064		11,428		23,450		5,419		28,869
Premium finance	426		480		906		1,388		228		1,616		2,962		521		3,483
Leases	398		835		1,233		(2,569)		4,449		1,880		(6,847)		12,002		5,155
Residential real estate	627		434		1,061		1,483		957		2,440		3,457		426		3,883
Home equity lines of credit	137		219		356		1,377		418		1,795		4,243		814		5,057
Consumer, indirect	680		152		832		1,904		963		2,867		4,343		3,409		7,752
Consumer, direct	(222)		392		170		218		434		652		656		739		1,395
Total loan income	7,624		9,554		17,178		22,658		25,014		47,672		62,581		41,743		104,324
Total interest income	$	9,622	$	7,552	$	17,174	$	30,156	$	22,623	$	52,779	$	65,396	$	55,584	$	120,980
INTEREST EXPENSE:
Deposits:
Savings accounts	$	(117)	$	(19)	$	(136)	$	327	$	(19)	$	308	$	949	$	(1)	$	948
Governmental deposit accounts	1,431		251		1,682		3,457		12		3,469		5,979		(33)		5,946
Interest-bearing demand accounts	(61)		49		(12)		323		7		330		840		(5)		835
Money market accounts	820		117		937		2,600		51		2,651		5,263		19		5,282
Retail CDs	1,655		1,297		2,952		5,554		963		6,517		9,742		1,116		10,858
Brokered CDs	1,182		1,474		2,656		941		5,950		6,891		1,873		10,421		12,294
Total deposit cost	4,910		3,169		8,079		13,202		6,964		20,166		24,646		11,517		36,163
Borrowed funds:
Short-term borrowings	2,073		(2,218)		(145)		1,188		3,588		4,776		3,040		10,908		13,948
Long-term borrowings	1,802		(981)		821		1,225		332		1,557		1,355		1,165		2,520
Total borrowed funds cost	3,875		(3,199)		676		2,413		3,920		6,333		4,395		12,073		16,468
Total interest expense	8,785		(30)		8,755		15,615		10,884		26,499		29,041		23,590		52,631
FTE net interest income	$	837	$	7,582	$	8,419	$	14,541	$	11,739	$	26,280	$	36,355	$	31,994	$	68,349

(a)The change in interest due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the dollar amounts of the change in each.

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Compared to the linked quarter, net interest income increased 10% and net interest margin expanded by 16 basis points. The increase in net interest income was primarily due to net interest income provided by Limestone following the Limestone Merger and increases in market interest rates. Net interest margin was 4.70% for the third quarter of 2023, compared to 4.54% for the linked quarter. The increase in net interest margin for the third quarter of 2023 compared to the linked quarter was primarily driven by a full quarter of accretion on the acquired Limestone portfolio in the third quarter compared to only two months in the second quarter. The third quarter was also impacted by a true-up of $3.6 million to the preliminary Limestone-related accretion, $1.9 million of which would have benefited the second quarter of 2023. Also impacting the increases in net interest income and net interest margin was 6 basis points of improvement in investment yields due to sales of lower-yielding investment securities and a full quarter of yields from the securities acquired in the Limestone Merger compared to two months in the linked quarter. Partially offsetting these benefits was an increase in interest expense resulting from a shift in the composition of funding sources to retail and brokered CDs from non-interest bearing deposits, combined with an increase in market interest rates for deposits and other funding sources.

Net interest income for the third quarter of 2023 grew 39% over the prior year quarter and net interest margin increased by 53 basis points. The increase in net interest income compared to the third quarter of 2022 was driven by increases in market interest rates, the Limestone Merger, and organic growth. Compared to the prior year quarter, loan yields grew 187 basis points due to the rising market interest rate environment and both acquisitive and organic growth, while borrowing costs increased 281 basis points due primarily to a change in the composition of borrowings and increases in market interest rates.

For the first nine months of 2023, net interest income and net interest margin grew 37% and 79 basis points, respectively, compared to 2022. During that same time, loan yields increased 175 basis points, which was partially offset by higher borrowing costs. The increase in net interest income was driven by increases in market interest rates and the additional net interest income provided by Limestone following the Limestone Merger.

Peoples recognized interest income on deferred loan fees/costs associated with PPP loans of $0.4 million during the third quarter of 2022 along with $22,000 of interest earned on PPP loans. The interest income recognized on PPP loans added 1 basis point to net interest margin for the third quarter of 2022. For the first nine months of 2022, interest income recognized on deferred loan fees/costs related to PPP loans was $2.2 million, and interest earned was $0.3 million. The interest income recognized on PPP loans added 3 basis points to net interest margin for the first nine months of 2022. The deferred loan fees/costs associated with PPP loans and interest earned on PPP loans were minimal for the third quarter of 2023, the linked quarter and the first nine months of 2023.

Accretion income, net of amortization expense, from acquisitions was $9.8 million for the third quarter of 2023, $4.5 million for the linked quarter and $2.8 million for the third quarter of 2022, which added 49 basis points, 24 basis points and 16 basis points, respectively, to net interest margin. The increases in accretion income for the third quarter of 2023, when compared to the linked quarter and the third quarter of 2022 were driven by accretion from the Limestone Merger and the aforementioned third quarter 2023 true-up to preliminary Limestone-related accretion. For the first nine months of 2023, accretion income, net of amortization expense, totaled $16.3 million and added 30 basis points to net interest margin compared to $9.4 million and 20 basis points for the first nine months of 2022. The increase in accretion income for the first nine months of 2023 compared to the same period in 2022 was due to higher accretion recognized from the Limestone Merger than was recorded due to the acquisitions of Vantage, NSL and Premier in the prior period.

Additional information regarding changes in the Unaudited Consolidated Balance Sheets can be found under appropriate captions of the “FINANCIAL CONDITION” section of this MD&A. Additional information regarding Peoples' interest rate risk and the potential impact of interest rate changes on Peoples' results of operations and financial condition can be found later in this MD&A under the caption "FINANCIAL CONDITION - Interest Rate Sensitivity and Liquidity."

Provision for (Recovery of) Credit Losses

The following table details Peoples’ provision for (recovery of) credit losses:


	Three Months Ended									Nine Months Ended
	September 30, 2023			June 30, 2023			September 30, 2022			September 30,
(Dollars in thousands)										2023			2022
Provision for (recovery of) other credit losses	$	3,764		$	7,751		$	1,558		$	13,188		$	(6,583)
Provision for checking account overdraft credit losses	289			232			218			701			772
Provision for (recovery of) credit losses	$	4,053		$	7,983		$	1,776		$	13,889		$	(5,811)
As a percentage of average total loans (a)	0.27		%	0.58		%	0.15		%	0.34		%	(0.17)		%
(a) Presented on an annualized basis.

The provision for (recovery of) credit losses recorded represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s quarterly estimates. The provision for credit losses for the third quarter of 2023 was driven by (i) loan growth, (ii) an increase in net charge-offs, (iii) updates to our prepayment, curtailment and funding rates, and (iv) a deterioration in macro-economic conditions used within the CECL model, partially offset by the release of reserves on

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individually analyzed loans. The provision for credit losses for the linked quarter was due to a provision of $9.4 million for the non-purchased credit deteriorated loans acquired in the Limestone Merger, partially offset by the release of reserves of $1.7 million on individually analyzed loans and a recovery of $1.0 million due to improvements in macro-economic conditions. The provision for credit losses for the third quarter of 2022 was largely attributable to a deterioration of macro-economic conditions, partially offset by the release of reserves on individually analyzed loans.

For the first nine months of 2023, the provision for credit losses was driven by (i) the addition of the provision for the non-purchased credit deteriorated loans acquired in the Limestone Merger, (ii) loan growth and (ii) economic forecast deterioration, partially offset by a reduction in the reserves for individually analyzed loans and the use of updated loss drivers. The recovery of credit losses for the first nine months of 2022 was primarily due to the impact of economic assumptions used in the CECL model.

Additional information regarding changes in the allowance for credit losses and loan credit quality can be found later in this MD&A under the caption “FINANCIAL CONDITION - Allowance for Credit Losses.”

Net (Loss) Gain Included in Total Non-Interest Income

Net (loss) gain includes net losses and net gains on investment securities, asset disposals and other transactions, which are recognized in total non-interest income. The following table details Peoples’ net losses and net gains for the periods presented:


	Three Months Ended						Nine Months Ended
	September 30, 2023		June 30, 2023		September 30, 2022		September 30,
(Dollars in thousands)							2023		2022
Net (loss) gain on investment securities	$	(7)	$	(166)	$	21	$	(2,108)	$	107

Net (loss) gain on asset disposals and other transactions:
Net (loss) gain on other assets	(284)		(44)		94		(557)		(47)
Net (loss) on OREO	—		(1,613)		(105)		(1,623)		(138)

Net (loss) on other transactions	(23)		(8)		(24)		(38)		(129)
Net (loss) on asset disposals and other transactions	$	(307)	$	(1,665)	$	(35)	$	(2,218)	$	(314)

The net loss on investment securities in the first nine months of 2023 was primarily due to a $2.0 million pre-tax net loss on sales of available-for-sale investment securities. During the first quarter of 2023, Peoples executed sales of $96.7 million of its lower yielding available-for-sale securities which were used to pay down overnight borrowings. The loss on the sale of the available-for-sale investment securities had a nominal impact on tangible book value as such loss was previously reflected in capital through accumulated other comprehensive loss. The realized losses recognized due to these transactions are projected to be earned back within the end of the 2023 fiscal year.

The net loss on asset disposals and other transactions for the third quarter of 2023 was due to $0.3 million of net losses on repossessed assets. The net loss for the linked quarter was primarily due to the $1.6 million write-down of an OREO property due to a pending sale of the property.

Total Non-Interest Income, Excluding Net Gains and Losses

Total non-interest income, excluding net gains and losses, comprised 20% of Peoples' total revenues (defined as net interest income plus total non-interest income excluding net gains and losses) for the third quarter of 2023, compared to 21% and 23% for the linked quarter and the third quarter of 2022, respectively. For the first nine months of 2023, total non-interest income, excluding net gains and losses, totaled 21% of total revenues compared to 25% for the first nine months of 2022. The decreases in these ratios for the third quarter and the first nine months of 2023 when compared to prior periods were primarily due to higher net interest income associated with income from Limestone following the Limestone Merger, coupled with increases in the market interest rates.

For the third quarter of 2023, electronic banking income comprised the largest portion of Peoples' total non-interest income, excluding net gains and losses. Peoples' electronic banking ("e-banking") services include ATM and debit cards, direct deposit services, internet and mobile banking, and remote deposit capture, and serve as alternative delivery channels to traditional sales offices for providing services to customers. The following table details Peoples' e-banking income:


	Three Months Ended						Nine Months Ended
	September 30, 2023		June 30, 2023		September 30, 2022		September 30,
(Dollars in thousands)							2023		2022


E-banking income	$	6,466	$	6,466	$	5,261	$	18,375	$	15,933

Peoples' e-banking income is derived largely from ATM and debit cards, as other services are mainly provided at no charge to customers. The amount of e-banking income is largely dependent on the timing and volume of customer activity. E-banking income increased for the third quarter of 2023 compared to the prior year third quarter primarily due to additional income provided by

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Limestone. E-banking income for the first nine months of 2023 was also impacted by increased customer activity including the additional customers from the Limestone Merger, when compared to the same period in 2022.

The following table details Peoples' insurance income:


	Three Months Ended						Nine Months Ended
	September 30, 2023		June 30, 2023		September 30, 2022		September 30,
(Dollars in thousands)							2023		2022


Property and casualty insurance commissions	$	3,585	$	3,360	$	2,958	$	10,197	$	8,859


Performance-based commissions	40		35		64		1,602		1,420
Life and health insurance commissions	548		535		508		1,647		1,464
Other fees and charges	77		74		88		233		252
Insurance income	$	4,250	$	4,004	$	3,618	$	13,679	$	11,995

Peoples' insurance income for the third quarter of 2023 increased when compared to that for the linked quarter and the third quarter of 2022, which was driven by higher performance-based property and casualty insurance commissions due to client acquisition efforts and hardening insurance markets. Insurance income in the first nine months of 2023 increased 14% when compared to the first nine months of 2022 due to higher commissions and additional customers.

Peoples' fiduciary income and brokerage income continued to be based primarily upon the value of assets under administration and management, with additional income generated from transaction commissions, cross-selling of products and additional retirement plan services business. The following table details Peoples’ trust and investment income:


	Three Months Ended						Nine Months Ended
	September 30, 2023		June 30, 2023		September 30, 2022		September 30,
(Dollars in thousands)							2023		2022
Fiduciary income	$	1,835	$	2,046	$	1,752	$	5,686	$	5,716
Brokerage income	1,782		1,667		1,578		5,076		4,858
Employee benefit fees	671		701		624		2,024		1,902
Trust and investment income	$	4,288	$	4,414	$	3,954	$	12,786	$	12,476

Fiduciary income and brokerage income decreased slightly in the third quarter of 2023 relative to the linked quarter due to market volatility. When compared to the third quarter of 2022, fiduciary income and brokerage income increased, which was driven by an increase in brokerage income due to an increase in assets under administration and management. For the first nine months of 2023, trust and investment income increased when compared to the same period in 2022 due to an increase in brokerage income, partially offset by less fiduciary income, primarily reflecting market volatility.

The following table details Peoples' assets under administration and management:


	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
(Dollars in thousands)	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022

Trust	$	1,900,488	$	1,931,789	$	1,803,887	$	1,764,639	$	1,682,334
Brokerage	1,364,372		1,379,309		1,318,300		1,211,868		1,127,831
Total	$	3,264,860	$	3,311,098	$	3,122,187	$	2,976,507	$	2,810,165
Quarterly average	$	3,319,655	$	3,205,186	$	3,076,285	$	2,965,985	$	2,844,181

The decreases in assets under administration and management at September 30, 2023 compared to at June 30, 2023 was driven by a decrease in trust assets and market value fluctuations. The increase in assets under administration and management at September 30, 2023 when compared to at September 30, 2022 was primarily due to the acquisition of an independent financial advisor in January of 2023 which increased brokerage assets by $30 million.

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Deposit account service charges are based on the recovery of costs associated with services provided. The following table details Peoples' deposit account service charges:


	Three Months Ended						Nine Months Ended
	September 30, 2023		June 30, 2023		September 30, 2022		September 30,
(Dollars in thousands)							2023		2022
Overdraft and non-sufficient funds fees	$	2,461	$	2,276	$	2,233	$	6,579	$	6,154
Account maintenance fees	1,577		1,623		1,353		4,661		3,971
Other fees and charges	478		254		247		952		692
Deposit account service charges	$	4,516	$	4,153	$	3,833	$	12,192	$	10,817

The amount of deposit account service charges, particularly fees for overdrafts and non-sufficient funds, is largely dependent on the timing and volume of customer activity. Management periodically evaluates its cost recovery fees to ensure they are reasonable based on operational costs and similar to fees charged in Peoples' markets by competitors. Deposit account service charges increased for the third quarter of 2023 compared to the linked quarter due to a full quarter of income from Limestone customers compared to only two months in the linked quarter. Deposit account service charges increased when comparing the third quarter and the year to date of 2023 to the same 2022 periods due to the Limestone Merger and increased maintenance fee rates.

The following table details the other items included within Peoples' total non-interest income:


	Three Months Ended			Nine Months Ended
	September 30, 2023	June 30, 2023	September 30, 2022	September 30,
(Dollars in thousands)				2023	2022

Other non-interest income	2,452	1,059	967	4,179	2,819
Bank owned life insurance income	1,375	842	694	2,924	1,922
Lease income	(66)	1,719	1,725	2,730	2,931
Mortgage banking income	237	189	328	740	1,116

The increases in non-interest income when comparing the three and the nine months ended September 30, 2023 to their respective prior periods of 2022 were primarily due to increases in operating lease income.

Bank owned life insurance income for the third quarter of 2023 increased compared to the linked quarter primarily due to a cumulative adjustment related to the acquired Limestone portfolio. Bank owned life insurance income for the third quarter and year to date of 2023, increased when compared to the same periods of 2022, due to the Limestone Merger as well as additional investments in bank owned life insurance.

Lease income is primarily comprised of (i) gains on the early termination of leases, (ii) fees received for referrals, (iii) gains and losses recognized on the sales of residual assets and (iv) syndication income. The third quarter of 2023 decrease in lease income when compared to the linked quarter and third quarter of 2022 was due to $1.6 million in net losses on the disposition of lease residuals during the quarter, partially offset by other lease income. The first nine months of 2023 decrease in lease income when compared to the same period of 2022 was also due to lease residual activity in the third quarter of 2023, partially offset by increases in lease income from Vantage.

Mortgage banking income is comprised mostly of net gains from the origination and sale of real estate loans in the secondary market, and, to a lesser extent, servicing income for loans sold with servicing retained. As a result, the amount of income recognized by Peoples is largely dependent on customer demand and long-term interest rates for residential real estate loans offered in the secondary market. Mortgage banking income for the third quarter of 2023 and the first nine months of 2023 declined when compared to the comparative prior periods of 2022 primarily due to the rising market interest rate environment.

In the third quarter of 2023, Peoples sold $0.8 million in loans into the secondary market with servicing retained and $9.4 million in loans with servicing released, compared to $1.1 million and $6.1 million, respectively, in the second quarter of 2023, and $4.4 million and $7.6 million, respectively, in the third quarter of 2022. For the first nine months of 2023, Peoples sold $2.7 million in loans into the secondary market with servicing retained, and $22.8 million in loans with servicing released, compared to $16.1 million and $21.6 million, respectively, for the first nine months of 2022.

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Non-Interest Expense

Salaries and employee benefit costs remain Peoples' largest non-interest expense, accounting for over one-half of total non-interest expense. The following table details Peoples' salaries and employee benefit costs:


	Three Months Ended						Nine Months Ended
	September 30, 2023		June 30, 2023		September 30, 2022		September 30,
(Dollars in thousands)							2023		2022
Base salaries and wages	$	24,152	$	27,407	$	18,762	$	71,891	$	54,846
Sales-based and incentive compensation	6,480		5,502		4,899		15,927		13,448
Employee benefits	4,307		3,622		3,340		12,044		10,282
Payroll taxes and other employment costs	1,949		1,535		1,796		5,854		5,276
Stock-based compensation	1,107		1,043		782		4,339		2,987
Deferred personnel costs	(1,387)		(1,084)		(961)		(3,394)		(2,907)
Salaries and employee benefit costs	$	36,608	$	38,025	$	28,618	$	106,661	$	83,932
Full-time equivalent employees:
Actual at end of period	1,482		1,500		1,244		1,482		1,244
Average during the period	1,494		1,393		1,253		1,359		1,106

Base salaries and wages for the third quarter of 2023 decreased compared to the linked quarter due to a $4.8 million decrease in acquisition-related expenses, partially offset by an increase in non-acquisition related expenses due to growth and a full quarter of expenses from Limestone employees compared to two months of expenses in the linked quarter. Base salaries and wages for the third quarter of 2023 and the first nine months of 2023 increased compared to the comparative prior periods due to $0.2 million and $5.3 million of acquisition-related expenses related to the Limestone Merger for the third quarter of 2023 and the first nine months of 2023, respectively, and additional expenses from Limestone employees in the third quarter of 2023 and the first nine months of 2023. Base salaries and wages for the first nine months of 2023 also increased when compared to the same period of 2022 due to annual merit increases as well as a full nine months of expenses related to the additional salaries associated with the acquisition of Vantage compared to seven months of expenses in the first nine months of 2022.

The increases in sales-based and incentive compensation for the third quarter of 2023 and the first nine months of 2023 compared to the comparative prior periods presented were primarily due to the overall company performance measures used in calculating incentive awards.

The increase in employee benefits for the third quarter of 2023 compared to the linked quarter, was primarily due to increased medical costs as well as a full quarter of expenses from Limestone employees compared to two months of expenses in the linked quarter. The increases in employee benefits for the third quarter of 2023 and the first nine months of 2023 compared to the third quarter of 2022 and the first nine months of 2022 were primarily due to the addition of Limestone employee benefits expenses. The increase in employee benefits for the first nine months of 2023 compared to the first nine months of 2022 was also due to higher medical costs reflecting a full nine months of expenses in 2023 for the Vantage employees versus seven months of expenses in the first nine months of 2022.

Payroll taxes and other employment costs for the third quarter of 2023 increased compared to the linked quarter due to an increase in payroll taxes due to growth and a full quarter of expenses from Limestone employees compared to two months of expenses in the linked quarter. The increases in payroll taxes and other employment costs for the three months and the nine months ended September 30, 2023, when compared to the three months and the nine months ended September 30, 2022, were primarily due to additional Limestone-related non-acquisition-related expenses and $0.1 million and $0.2 million, respectively, of acquisition-related expenses in the third quarter and first nine months of 2023.

Stock-based compensation is generally recognized over the vesting period, which generally ranges from immediate vesting to vesting at the end of three years. An adjustment is made at the vesting date to reverse expense relating to forfeitures for performance awards, and at the date of forfeiture to reverse expense for non-vested restricted common share awards. Stock grants to retirement eligible grantees are expensed either immediately or over a shorter period than three years. The majority of Peoples' stock-based compensation is attributable to annual equity-based incentive awards to employees, which are awarded in the first quarter of each year based upon Peoples achieving certain performance goals during the prior year, and are generally contingent on employment through the vesting period. Stock-based compensation for the third quarter of 2023 and the first nine months of 2023 increased when compared to the third quarter of 2022 and the first nine months of 2022 due to additional employees, including the ones added in the acquisition of Vantage.

Deferred personnel costs represent the portion of current period salaries and employee benefit costs considered to be direct loan origination costs. These costs are capitalized and recognized over the life of the loan as a yield adjustment in interest income. As a result, the amount of deferred personnel costs for each period corresponds directly with the volume of loan originations, coupled with

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the average deferred costs per loan that are updated annually at the beginning of each year. The increases in deferred personnel costs for the third quarter and the first nine months of 2023 compared to the comparative prior periods were primarily due to an increase in loan origination volume.

Peoples' net occupancy and equipment expense was comprised of the following:


	Three Months Ended						Nine Months Ended
	September 30, 2023		June 30, 2023		September 30, 2022		September 30,
(Dollars in thousands)							2023		2022
Depreciation	$	2,018	$	1,876	$	1,722	$	5,684	$	5,315
Repairs and maintenance costs	1,846		1,334		1,333		4,441		3,959
Property taxes, utilities and other costs	1,158		1,182		994		3,497		3,190
Net rent expense	479		988		764		2,214		2,205
Net occupancy and equipment expense	$	5,501	$	5,380	$	4,813	$	15,836	$	14,669

The third quarter of 2023 net occupancy and equipment expense increased when compared to the linked quarter due to a full quarter of Limestone-related net occupancy and equipment expense compared to two months of expense in the linked quarter. The third quarter and the first nine months of 2023 net occupancy and equipment expense increased when compared to the comparative periods in 2022 due to additional net occupancy and equipment expense from the Limestone Merger.

The following table details the other items included in total non-interest expense:


	Three Months Ended						Nine Months Ended
	September 30, 2023		June 30, 2023		September 30, 2022		September 30,
(Dollars in thousands)							2023		2022
Data processing and software expense	$	6,288	$	4,728	$	3,279	$	15,578	$	9,228
Professional fees	3,456		7,438		2,832		13,775		8,784
Amortization of other intangible assets	3,280		2,800		2,023		7,951		5,765
E-banking expense	1,836		1,832		2,648		5,159		8,134
Marketing expense	1,267		1,357		1,136		3,554		2,991
FDIC insurance premiums	1,260		1,464		709		3,525		2,921
Franchise tax expense	772		872		1,075		2,678		2,941
Other loan expenses	856		538		511		2,133		1,788
Communication expense	752		724		599		2,089		1,873
Other non-interest expense	9,820		5,465		4,010		19,859		10,755

Data processing and software expenses for the third quarter and the first nine months of 2023 were impacted by $1.3 million of acquisition-related data processing and software expenses attributable to Limestone in the third quarter of 2023, which was the primary driver of the increase when compared to the linked quarter. The increases for the third quarter and the first nine months of 2023 when compared to the third quarter and first nine months of 2022 were also driven by software upgrades and implementation of new systems, coupled with the increased size of Peoples' organization.

Professional fees for the third quarter of 2023 decreased when compared to the linked quarter due to less acquisition-related expenses. Professional fees for the third quarter and the first nine months of 2023 increased when compared to the comparative prior periods in 2022 due to $0.4 million and $5.5 million of acquisition-related expenses during the third quarter and first nine months of 2023, respectively, related to the Limestone Merger.

Amortization of other intangible assets for the third quarter and the first nine months of 2023 increased when compared to the linked quarter and comparative prior periods in 2022 due to additional expenses attributable to the Limestone Merger during the third quarter and the first nine months of 2023, respectively.

Peoples' e-banking expense is comprised of costs associated with debit and ATM cards. E-banking expense decreased for the third quarter and first nine months of 2023 when compared to the same periods of 2022 due to reduced costs for Peoples' online banking platform and a reclassification of those costs relative to the prior period to data processing and software expense.

Marketing expense and communication expense for the third quarter of 2023 decreased when compared to the linked quarter due to additional marketing campaigns to promote the Limestone Merger in the second quarter of 2023. Marketing expense and communication expense for the third quarter and the first nine months of 2023 increased when compared to the comparative prior periods in 2022 due to additional marketing campaigns in 2023. Additionally, Limestone added additional communication expenses in the third quarter and the first nine months of 2023, respectively.

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Peoples' FDIC insurance premiums for the third quarter of 2023 decreased when compared to the linked quarter due to a prior period true-up related to an increase in rates assessed by the FDIC. FDIC insurance premiums for the third quarter and the first nine months of 2023 increased when compared to the comparative prior periods in 2022 due to organic and acquisitive growth and an increase in rates assessed by the FDIC. The first nine months of 2022 was also impacted by an adjustment in the first quarter of 2022 relating to prior acquisitions.

Peoples is subject to state franchise taxes, which are based largely on Peoples' equity, in the states where Peoples has a physical presence. Franchise tax expense also includes the Ohio Financial Institution Tax ("FIT"), which is a business privilege tax that is imposed on financial institutions organized for profit and doing business in Ohio. The Ohio FIT is based on the total equity capital in proportion to the taxpayer's gross receipts in Ohio as of the most recent year-end. The decreases for the third quarter and the first nine months of 2023 versus the respective prior comparative periods were driven by a lower apportionment in Ohio compared to all comparative prior periods.

Other loan expenses during the third quarter of 2023 and the first nine months of 2023 increased when compared to the respective prior comparative periods primarily due to increases in miscellaneous loan and collection expenses. The third quarter and the first nine months of 2023 increases when compared to the same periods of 2022 were also impacted by Limestone-related expenses and increases in business loan expenses and credit bureau expenses.

Other non-interest expense for the third quarter of 2023 and the first nine months of 2023 increased when compared to the linked quarter and comparative prior periods in 2022 due to a $2.4 million settlement charge in relation to the termination of the pension plan and $1.8 million of acquisition-related expenses related to the Limestone Merger, mostly due to early contract termination fees, recorded in the third quarter of 2023. The increases in other non-interest expense for the third quarter of 2023 and the first nine months of 2023 were also impacted by increases of $0.6 million, $0.9 million, and $1.1 million in operating lease expense when compared to the linked quarter, third quarter of 2022, and first nine months of 2022, respectively.

Income Tax Expense

Peoples recorded income tax expense of $8.8 million with an effective tax rate of 21.7% for the third quarter of 2023, compared to income tax expense of $6.2 million with an effective tax rate of 22.6% for the linked quarter and income tax expense of $7.4 million with an effective tax rate of 22.2% for the third quarter of 2022. Income tax expense for the third quarter of 2023 compared to the linked quarter and the third quarter of 2022, increased due to higher net income before income taxes. The effective rate decrease for the third quarter of 2023 when compared to the linked quarter and the third quarter of 2022 was primarily due to updates to the blended state tax rate. Peoples recorded income tax expense of $22.1 million with an effective tax rate of 21.7% in the first nine months of 2023 and $20.2 million with an effective tax rate of 21.4% in the first nine months of 2022. The increase in income tax expense for the first nine months of 2023 when compared to the same 2022 period was driven by higher pre-tax income.

Additional information regarding income taxes can be found in "Note 13. Income Taxes" of the Notes to the Consolidated Financial Statements included in Peoples' 2022 Form 10-K.

Pre-Provision Net Revenue (Non-US GAAP)

Pre-provision net revenue ("PPNR") has become a key financial measure used by state and federal bank regulatory agencies when assessing the capital adequacy of financial institutions. PPNR is defined as net interest income plus total non-interest income, excluding all gains and losses, minus total non-interest expense. As a result, PPNR represents the earnings capacity that can be either retained in order to build capital or used to absorb unexpected losses and preserve existing capital. This ratio represents a Non-US GAAP financial measure since it excludes the provision for (recovery of) credit losses and all gains and losses included in earnings.

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The following table provides a reconciliation of this Non-US GAAP financial measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented:


	Three Months Ended									Nine Months Ended
	September 30, 2023			June 30, 2023			September 30, 2022			September 30,
(Dollars in thousands)										2023			2022
Pre-provision net revenue:
Income before income taxes	$	40,729		$	27,262		$	33,388		$	101,597		$	94,661
Add: provision for credit losses	4,053			7,983			1,776			13,889			1,776

Add: loss on OREO	1			1,612			105			1,623			138
Add: loss on investment securities	7			166			—			2,108			44
Add: loss on other assets	283			45			—			557			142
Add: loss on other transactions	23			8			24			38			128

Less: recovery of credit losses	—			—			—			—			7,587
Less: gain on investment securities	—			—			21			—			151

Less: gain on other assets	—			—			94			—			94
Pre-provision net revenue	$	45,096		$	37,076		$	35,178		$	119,812		$	89,057

Total average assets	$8,806,409			$8,342,883			$7,124,108			$8,120,885			$7,103,979

Pre-provision net revenue to total average assets (annualized)	2.03		%	1.78		%	1.96		%	1.97		%	1.68		%
Weighted-average common shares outstanding - diluted	35,061,897			32,649,976			27,973,255			31,977,486			28,009,263
Pre-provision net revenue per common share - diluted	$	1.28		$	1.13		$	1.25		$	3.72		$	3.17

The increase in the PPNR for the third quarter of 2023 compared to the second quarter of 2023 was driven by increased net interest income due to a full quarter of income from the Limestone Merger compared to two months in the linked quarter and the positive impact of recent increases in market interest rates, partially offset by an increase in non-interest expense, primarily due to the Limestone Merger. The increases in PPNR for the third quarter and the first nine months of 2023 when compared to the same periods in 2022 were due to increased net interest income reflecting the positive impact of recent increases in market interest rates as well as the additional net interest income from Limestone customers after the Limestone Merger.

Core Non-Interest Expense (Non-US GAAP)

Core non-interest expense is a financial measure used to evaluate Peoples' recurring expense stream. This measure is Non-US GAAP since it excludes the impact of all acquisition-related expenses, pension settlement charges, COVID-19-related expenses and the COVID-19 Employee Retention Credit.

The following table provides a reconciliation of this Non-US GAAP measure to the amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements for the periods presented:


	Three Months Ended						Nine Months Ended
	September 30, 2023		June 30, 2023		September 30, 2022		September 30,
(Dollars in thousands)							2023		2022
Core non-interest expense:
Total non-interest expense	$	71,696	$	70,623	$	52,253	$	198,798	$	153,781

Less: acquisition-related expenses	4,434		10,709		339		15,694		2,314
Less: pension settlement charges	2,424		—		139		2,424		139


Less: COVID-19-related expenses	—		—		9		—		132
Add: COVID-19 Employee Retention Credit	—		548		—		548		—


Core non-interest expense	$	64,838	$	60,462	$	51,766	$	181,228	$	151,196

Efficiency Ratio (Non-US GAAP)

The efficiency ratio is a key financial measure used to monitor performance. The efficiency ratio is calculated as total non-interest expense (less amortization of other intangible assets) as a percentage of FTE net interest income plus total non-interest income excluding net gains and losses. This measure is Non-US GAAP since it excludes amortization of other intangible assets and all gains and losses included in earnings, and uses FTE net interest income.

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	Three Months Ended									Nine Months Ended
	September 30, 2023			June 30, 2023			September 30, 2022			September 30,
(Dollars in thousands)										2023			2022

Efficiency ratio:
Total non-interest expense	$	71,696		$	70,623		$	52,253		$	198,798		$	153,781
Less: amortization of other intangible assets	3,280			2,800			2,023			7,951			5,765
Adjusted total non-interest expense	68,416			67,823			50,230			190,847			148,016

Total non-interest income	23,204			21,015			20,366			63,279			59,802

Less: net (loss) gain on investment securities	(7)			(166)			21			(2,108)			107
Less: net loss on asset disposals and other transactions	(307)			(1,665)			(35)			(2,218)			(314)
Total non-interest income excluding net gains and losses	23,518			22,846			20,380			67,605			60,009

Net interest income	93,274			84,853			67,051			251,005			182,829
Add: FTE adjustment (a)	444			446			387			1,289			1,116
Net interest income on an FTE basis	93,718			85,299			67,438			252,294			183,945
Adjusted revenue	$	117,236		$	108,145		$	87,818		$	319,899		$	243,954
Efficiency ratio	58.36		%	62.71		%	57.20		%	59.66		%	60.67		%

Efficiency ratio adjusted for non-core items:
Core non-interest expense	$	64,838		$	60,462		$	51,766		$	181,228		$	151,196
Less: amortization of other intangible assets	3,280			2,800			2,023			7,951			5,765
Adjusted core non-interest expense	61,558			57,662			49,743			173,277			145,431
Non-interest income excluding net gains and losses	23,518			22,846			20,380			67,605			60,009
Net interest income on an FTE basis	93,718			85,299			67,438			252,294			183,945
Adjusted revenue	$	117,236		$	108,145		$	87,818		$	319,899		$	243,954
Efficiency ratio adjusted for non-core items	52.51		%	53.32		%	56.64		%	54.17		%	59.61		%

(a) Tax effect is calculated using a 23.3% blended corporate income tax rate for the three months and the nine months ended September 30, 2023, a 23.6% blended corporate income tax rate for the three months ended June 30, 2023, and a 23.3% blended corporate income tax rate for the three months and the nine months ended September 30, 2022.

The efficiency ratio decreased for the third quarter of 2023 when compared to the second quarter of 2023 and increased when compared to the third quarter of 2022. The decrease in the efficiency ratio compared to the linked quarter was primarily due to higher net interest income due to an increase in market interest rates and a full quarter with the additional customers from the Limestone Merger compared to two months in the linked quarter and less acquisition-related expenses, partially offset by an increase in non-acquisition-related non-interest expenses. The increase in the efficiency ratio compared to the prior year quarter was primarily due to the increases in non-interest expenses, primarily from the Limestone Merger, which was mostly offset by higher net interest income due to increases in the market interest rates and additional customers from the Limestone Merger. The efficiency ratio for the first nine months of 2023 improved when compared to the first nine months of 2022 due to increased net interest income driven by increases in the market interest rates and additional net interest income provided by Limestone after the Limestone Merger, partially offset by an increase in non-interest expenses due to the Limestone Merger.

The efficiency ratios adjusted for non-core items for the third quarter of 2023 and the first nine months of 2023 improved when compared to the comparative prior periods of 2022 due to increased net interest income driven by increases in the market interest rates and additional net interest income provided by Limestone after the Limestone Merger, partially offset by an increase in core non-interest expense due to the Limestone Merger.

Return on Average Assets Adjusted for Non-Core Items Ratio (Non-US GAAP)

In addition to return on average assets, management uses return on average assets adjusted for non-core items to monitor performance. The return on average assets adjusted for non-core items ratio represents a Non-US GAAP financial measure since it excludes the after-tax impact of all gains and losses, acquisition-related expenses, pension settlement charges, COVID-19-related expenses and the COVID-19 Employee Retention Credit.

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	Three Months Ended									Nine Months Ended
	September 30, 2023			June 30, 2023			September 30, 2022			September 30,
(Dollars in thousands)										2023			2022

Annualized net income adjusted for non-core items:
Net income	$	31,882		$	21,096		$	25,978		$	79,538		$	74,443

Add: net loss on investment securities	7			166			—			2,108			—
Less: tax effect of net loss on investment securities (a)	2			35			—			443			—
Less: net gain on investment securities	—			—			21			—			107
Add: tax effect of net gain on investment securities (a)	—			—			4			—			22
Add: net loss on asset disposals and other transactions	307			1,665			35			2,218			314
Less: tax effect of net loss on asset disposals and other transactions (a)	65			349			7			466			66



Add: acquisition-related expenses	4,434			10,709			339			15,694			2,314
Less: tax effect of acquisition-related expenses (a)	931			2,249			71			3,296			486
Add: pension settlement charges	2,424			—			139			2,424			139
Less: tax effect of pension settlement charges (a)	509			—			29			509			29


Add: COVID-19-related expenses	—			—			9			—			132
Less: tax effect of COVID-19-related expenses (a)	—			—			2			—			28
Less: COVID-19 Employee Retention Credit	—			548			—			548			—
Add: tax effect of COVID-19 Employee Retention Credit (a)	—			115			—			115			—










Net income adjusted for non-core items (after tax)	$	37,547		$	30,570		$	26,374		$	96,835		$	76,648
Days in the period	92			91			92			273			273
Days in the year	365			365			365			365			365
Annualized net income	$	126,488		$	84,616		$	103,065		$	106,342		$	99,530
Annualized net income adjusted for non-core items (after tax)	$	148,964		$	122,616		$	104,636		$	129,468		$	102,478
Return on average assets:
Annualized net income	$	126,488		$	84,616		$	103,065		$	106,342		$	99,530
Total average assets	8,806,409			8,342,883			7,124,108			8,120,885			7,103,979
Return on average assets	1.44		%	1.01		%	1.45		%	1.31		%	1.40		%
Return on average assets adjusted for non-core items:
Annualized net income adjusted for non-core items (after tax)	$	148,964		$	122,616		$	104,636		$	129,468		$	102,478
Total average assets	8,806,409			8,342,883			7,124,108			8,120,885			7,103,979
Return on average assets adjusted for non-core items (after tax)	1.69		%	1.47		%	1.47		%	1.59		%	1.44		%

(a) Based on a 21% statutory federal corporate income tax rate.

The return on average assets adjusted for non-core items for the third quarter of 2023 increased when compared to the linked quarter, due to an increase in annualized net income resulting from an increase in net interest income and a decrease in acquisition-related expenses, partially offset by an increase in average assets resulting from the Limestone Merger as well as increases in non-interest expenses. The increase in the return on average assets adjusted for non-core items for the third quarter of 2023, compared to the third quarter of 2022, was attributable to an increase in annualized net income primarily due to an increase in net interest income, partially offset by the assets acquired in the Limestone Merger and an increase in expenses. The return on average assets adjusted for non-core items for the first nine months of 2023 increased when compared to the first nine months of 2022, due to a higher annualized net income due to an increase in net interest income, partially offset by an increase in average assets, higher non-interest expenses, and a provision for credit losses compared to a recovery of credit losses in the first nine months of 2022.

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Return on Average Tangible Equity Ratio (Non-US GAAP)

The return on average tangible equity ratio is a key financial measure used to monitor performance. This ratio is calculated as annualized net income (less the after-tax impact of amortization of other intangible assets) divided by average tangible equity. This measure is Non-US GAAP since it excludes amortization of other intangible assets from earnings and the impact of goodwill and other intangible assets acquired through acquisitions on total stockholders' equity.


	Three Months Ended									Nine Months Ended
	September 30, 2023			June 30, 2023			September 30, 2022			September 30,
(Dollars in thousands)										2023			2022
Annualized net income excluding amortization of other intangible assets:
Net income	$	31,882		$	21,096		$	25,978		$	79,538		$	74,443
Add: amortization of other intangible assets	3,280			2,800			2,023			7,951			5,765
Less: tax effect of amortization of other intangible assets (a)	689			588			425			1,670			1,211
Net income excluding amortization of other intangible assets	$	34,473		$	23,308		$	27,576		$	85,819		$	78,997
Days in the period	92			91			92			273			273
Days in the year	365			365			365			365			365
Annualized net income	$	126,488		$	84,616		$	103,065		$	106,342		$	99,530
Annualized net income excluding amortization of other intangible assets	$	136,768		$	93,488		$	109,405		$	114,740		$	105,619
Average tangible equity:
Total average stockholders' equity	$	1,004,858		$	951,438		$	797,859		$	919,998		$	807,869
Less: average goodwill and other intangible assets	411,229			387,055			329,482			374,924			321,043
Average tangible equity	$	593,629		$	564,383		$	468,377		$	545,074		$	486,826
Return on total average stockholders' equity ratio:
Annualized net income	$	126,488		$	84,616		$	103,065		$	106,342		$	99,530
Total average stockholders' equity	$	1,004,858		$	951,438		$	797,859		$	919,998		$	807,869
Return on total average stockholders' equity	12.59		%	8.89		%	12.92		%	11.56		%	12.32		%
Return on average tangible equity ratio:
Annualized net income excluding amortization of other intangible assets	$	136,768		$	93,488		$	109,405		$	114,740		$	105,619
Average tangible equity	$	593,629		$	564,383		$	468,377		$	545,074		$	486,826
Return on average tangible equity	23.04		%	16.56		%	23.36		%	21.05		%	21.70		%

(a) Based on a 21% statutory federal corporate income tax rate.

The return on total average stockholders' equity and average tangible equity ratios increased when compared to the linked quarter due to an increase in annualized net income mainly attributable to an increase in net interest income, partially offset by an increase in acquisition-related expenses and non-acquisition-related expenses. The decreases in the return on total average stockholders' equity and average tangible equity ratios in the third quarter of 2023 when compared to the same period of 2022 were due to the issuance of 6.8 million common shares as consideration in the Limestone Merger, an increase in acquisition-related expenses, and an increase in the provision for credit losses due to the initial provision for the non-purchased credit deteriorated loans acquired from Limestone, partially offset by an increase in total net interest income driven by the recent increases in market interest rates and additional net interest income from Limestone following the Limestone Merger. The decrease in the return on total average stockholders' equity and average tangible equity ratios in the first nine months of 2023 when compared to the same period of 2022 was primarily due to the factors that increased equity mentioned above, partially offset by an increase in net annualized income due to an increase in net interest income.

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FINANCIAL CONDITION

Cash and Cash Equivalents

At September 30, 2023, Peoples' interest-bearing deposits in other banks had increased $131.7 million from December 31, 2022. The total cash and cash equivalents balance included $167.8 million of excess cash reserves being maintained at the FRB of Cleveland at September 30, 2023, compared to $33.1 million at December 31, 2022. The amount of excess cash reserves maintained is dependent upon Peoples' daily liquidity position, which is driven primarily by changes in deposit and loan balances.

Through the first nine months of 2023, Peoples' total cash and cash equivalents increased $145.1 million, which reflected cash inflows of $113.1 million of cash provided by operating activities and $111.1 million of cash provided by financing activities, partially offset by cash outflows of $79.1 million of cash used in investing activities. The cash provided by financing activities was largely driven by a $369.6 million net increase in interest-bearing deposits and $70.1 million of proceeds from long-term borrowings, partially offset by (i) a net decrease in non-interest bearing deposits of $283.0 million, (ii) $37.9 million in cash dividends paid and (iii) $32.5 million in payments on long-term borrowings. Peoples' use of cash in investing activities reflected cash outflows from a $285.2 million net decrease in loans held for investment and net cash outflows from held-to-maturity investment securities of $115.1 million, partially offset by net cash inflows from available-for-sale investment securities of $249.5 million and $93.0 million of cash received in the Limestone Merger.

Further information regarding the management of Peoples' liquidity position can be found later in this discussion under “Interest Rate Sensitivity and Liquidity.”

Investment Securities

The following table provides information regarding Peoples’ investment portfolio:


(Dollars in thousands)	Weighted Average Yield		September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
Available-for-sale securities, at fair value:
Obligations of:
U.S. Treasury and government agencies	3.11	%	$	42,466	$	75,255	$	58,438	$	152,422	$	172,055
U.S. government sponsored agencies	2.40	%	103,932		98,324		98,311		88,115		80,915
States and political subdivisions	2.54	%	220,460		248,271		224,996		225,882		230,022
Residential mortgage-backed securities	2.08	%	593,104		635,487		605,270		604,653		624,061
Commercial mortgage-backed securities	1.83	%	50,840		52,830		52,153		50,049		52,504
Bank-issued trust preferred securities	6.49	%	7,779		23,272		10,329		10,278		10,287



Total fair value			$	1,018,581	$	1,133,439	$	1,049,497	$	1,131,399	$	1,169,844
Total amortized cost			$	1,211,794	$	1,292,331	$	1,196,521	$	1,300,719	$	1,349,800
Net unrealized loss			$	(193,213)	$	(158,892)	$	(147,024)	$	(169,320)	$	(179,956)
Held-to-maturity securities, at amortized cost:
Obligations of:
U.S. government sponsored agencies	4.36	%	$	174,699	$	176,027	$	194,184	$	132,366	$	59,871
States and political subdivisions (a)	2.23	%	144,490		144,668		144,844		145,022		145,252
Residential mortgage-backed securities	3.89	%	248,627		243,807		245,294		176,215		111,707
Commercial mortgage-backed securities	2.47	%	107,593		109,423		109,750		106,609		90,971
Total amortized cost			$	675,409	$	673,925	$	694,072	$	560,212	$	407,801
Other investment securities			$	66,332	$	63,579	$	52,763	$	51,609	$	39,039
Total investment securities:
Amortized cost			$	1,953,535	$	2,029,835	$	1,943,356	$	1,912,540	$	1,796,640
Carrying value			$	1,760,322	$	1,870,943	$	1,796,332	$	1,743,220	$	1,616,684

(a)Amortized cost is presented net of the allowance for credit losses of $238 at September 30, 2023, $241 at December 31, 2022 and $238 at September 30, 2022.

For the third quarter of 2023, total investment securities decreased compared to the linked quarter, largely due to sales of lower-yielding available-for-sale securities and an increase in unrealized losses on available-for-sale securities due to the rising market interest rate environment. During the first quarter of 2023, Peoples executed the sale of $96.7 million of its lower yielding available-

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for-sale securities for an after-tax loss of $1.6 million. Proceeds from the sale were used to pay down overnight borrowings. The realized losses recognized due to these transactions are projected to be earned back within the 2023 fiscal year.

Additional information regarding Peoples' investment portfolio can be found in "Note 3 Investment Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Loans and Leases

The following table provides information regarding outstanding loan balances:


(Dollars in thousands)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
Originated loans and leases:
Construction	$	289,657		$	297,051		$	222,915		$	212,869		$	175,388
Commercial real estate, other	1,161,064			1,035,473			995,176			919,531			891,576
Commercial real estate	1,450,721			1,332,524			1,218,091			1,132,400			1,066,964
Commercial and industrial	860,407			873,386			840,194			835,178			814,593
Premium finance	189,251			162,357			158,263			159,197			167,682
Leases	328,365			287,948			251,711			226,438			178,083
Residential real estate	405,917			396,667			386,964			384,262			381,104
Home equity lines of credit	140,787			132,222			132,531			132,093			124,524
Consumer, indirect	668,371			654,371			647,177			629,426			592,309
Consumer, direct	114,160			101,786			99,299			98,706			99,282
Consumer	782,531			756,157			746,476			728,132			691,591
Deposit account overdrafts	857			830			749			722			597
Total originated loans and leases	$	4,158,836		$	3,942,091		$	3,734,979		$	3,598,422		$	3,425,138
Acquired loans and leases (a):
Construction	$	84,359		$	121,690		$	9,381		$	34,072		$	40,233
Commercial real estate, other	1,028,920			1,036,041			485,886			503,987			531,903
Commercial real estate	1,113,279			1,157,731			495,267			538,059			572,136
Commercial and industrial	268,402			286,924			50,945			57,456			62,879
Premium finance	—			—			—			—			—
Leases	74,270			89,843			102,930			118,693			134,764
Residential real estate	386,048			394,775			325,638			339,098			352,257
Home equity lines of credit	63,153			66,999			41,852			45,765			50,001
Consumer, indirect	—			—			—			—			—
Consumer, direct	20,402			36,233			8,107			9,657			14,032
Consumer	20,402			36,233			8,107			9,657			14,032
Total acquired loans and leases	$	1,925,554		$	2,032,505		$	1,024,739		$	1,108,728		$	1,186,069
Total loans and leases	$	6,084,390		$	5,974,596		$	4,759,718		$	4,707,150		$	4,611,207



Percent of loans and leases to total loans and leases:
Construction	6.1		%	7.0		%	4.9		%	5.2		%	4.7		%
Commercial real estate, other	36.0		%	34.8		%	31.1		%	30.2		%	30.9		%
Commercial real estate	42.1		%	41.8		%	36.0		%	35.4		%	35.6		%
Commercial and industrial	18.6		%	19.4		%	18.7		%	19.0		%	19.0		%
Premium finance	3.1		%	2.7		%	3.3		%	3.4		%	3.6		%
Leases	6.6		%	6.3		%	7.4		%	7.3		%	6.8		%
Residential real estate	13.0		%	13.2		%	15.0		%	15.4		%	15.9		%
Home equity lines of credit	3.4		%	3.3		%	3.7		%	3.8		%	3.8		%
Consumer, indirect	11.0		%	11.0		%	13.6		%	13.4		%	12.8		%
Consumer, direct	2.2		%	2.3		%	2.3		%	2.3		%	2.5		%
Consumer	13.2		%	13.3		%	15.9		%	15.7		%	15.3		%

Total percentage	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%
Residential real estate loans being serviced for others	$	366,996		$	375,882		$	384,005		$	392,364		$	400,736

(a) Includes all loans acquired, and related loan discount recorded as part of acquisition accounting, in 2012 or thereafter. Loans that were acquired and subsequently re-underwritten are reported as originated upon execution of such credit actions (for example, renewals and increases in lines of credit).

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The period-end total loan and lease balances at September 30, 2023 increased $109.8 million, or 7% annualized, compared to at June 30, 2023. The increase in the period-end loan and lease balance at September 30, 2023 compared to June 30, 2023 was primarily driven by increases of (i) $118.5 million in other commercial real estate loans, (ii) $26.9 million in premium finance loans and (iii) $24.8 million in leases, partially offset by decreases of $44.7 million in construction loans and $31.5 million in commercial and industrial loans. The increase in the period-end loan and lease balances at June 30, 2023 compared to at March 31, 2023 was primarily driven by loans acquired in the Limestone Merger totaling $1.1 billion. Excluding the loans acquired in the Limestone Merger, period-end loan and lease balances increased $358.6 million, or 10% annualized, when compared to at December 31, 2022, driven by increases of $182.8 million, $57.5 million, $48.4 million, $38.9 million, and $30.1 million in other commercial real estate loans, leases, construction loans, indirect consumer loans, and premium finance loans, respectively. These increases were partially offset by a decrease of $13.1 million in consumer residential real estate loans. Excluding the loans acquired in the Limestone Merger, period-end loan and lease balances increased $454.6 million, or 10% annualized, when compared to at September 30, 2022 primarily due to increases of $182.9 million, $89.8 million, $79.8 million, $76.1 million and $21.6 million in other commercial real estate loans, leases, construction loans, indirect consumer loans and premium finance loans, respectively. These increases were partially offset by a reduction of $23.1 million in consumer residential real estate loans.

Loan Concentration

Peoples categorizes its commercial loans according to standard industry classifications and monitors for concentrations in a single industry or multiple industries that could be impacted by changes in economic conditions in a similar manner. Peoples' commercial lending activities continue to be spread over a diverse range of businesses from all sectors of the economy, with no single industry comprising over 13% of Peoples' total loan portfolio.

Loans secured by commercial real estate, including commercial construction loans, continued to comprise the largest portion of Peoples' loan portfolio. The following tables provide information regarding the largest concentrations of commercial construction loans and commercial real estate loans within the loan portfolio at September 30, 2023:


(Dollars in thousands)	Outstanding Balance		Loan Commitments		Total Exposure		% of Total



































Construction:
Apartment complexes	$	208,738	$	196,191	$	404,929	55.8	%
Residential property	19,044		32,616		51,660		7.1	%

Land only	30,683		4,514		35,197		4.9	%
Retail facilities	22,576		1,545		24,121		3.3	%

Industrial	21,872		13,544		35,416		4.9	%

Student housing	2,640		12,360		15,000		2.1	%

Lodging and lodging related	3,406		16,749		20,155		2.8	%



Land development	35,128		51,559		86,687		11.9	%
Other (a)	29,929		22,396		52,325		7.2	%
Total construction	$	374,016	$	351,474	$	725,490	100.0	%

(a) All other total exposures by industry are less than 2% of the Total Exposure.

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(Dollars in thousands)	Outstanding Balance		Loan Commitments		Total Exposure		% of Total
Commercial real estate, other:
Office buildings and complexes:
Owner occupied	$	83,274	$	3,274	$	86,548	3.8	%
Non-owner occupied	134,771		8,477		143,248		6.3	%
Total office buildings and complexes	$	218,045	$	11,751	$	229,796	10.1	%
Retail facilities:
Owner occupied	$	58,461	$	3,027	$	61,488	2.7	%
Non-owner occupied	232,105		522		232,627		10.2	%
Total retail facilities	$	290,566	$	3,549	$	294,115	12.9	%
Mixed-use facilities:
Owner occupied	$	22,035	$	467	$	22,502	1.0	%
Non-owner occupied	22,749		1,084		23,833		1.0	%
Total mixed-use facilities	$	44,784	$	1,551	$	46,335	2.0	%
Apartment complexes	280,260		4,812		285,072		12.6	%
Light industrial facilities:
Owner occupied	128,085		3,124		131,209		5.8	%
Non-owner occupied	$	99,875	$	2,130	$	102,005	4.5	%
Total light industrial facilities	227,960		5,254		233,214		10.3	%
Assisted living facilities and nursing homes	$	129,912	$	6,994	$	136,906	6.0	%
Warehouse facilities:
Owner occupied	$	56,796	$	1,495	$	58,291	2.6	%
Non-owner occupied	44,760		420		45,180		2.0	%
Total warehouse facilities	$	101,556	$	1,915	$	103,471	4.6	%
Lodging and lodging related:
Owner occupied	$	27,674	$	3,165	$	30,839	1.4	%
Non-owner occupied	141,540		1		141,541		6.2	%
Total lodging and lodging related	$	169,214	$	3,166	$	172,380	7.6	%
Education services:
Owner occupied	$	17,547	$	—	$	17,547	0.8	%
Non-owner occupied	30,216		4,000		34,216		1.5	%
Total education services	$	47,763	$	4,000	$	51,763	2.3	%
Healthcare facilities:
Owner occupied	$	22,866	$	103	$	22,969	1.0	%
Non-owner occupied	22,863		429		23,292		1.0	%
Total healthcare facilities	$	45,729	$	532	$	46,261	2.0	%
Restaurant/bar facilities:
Owner occupied	$	39,163	$	245	$	39,408	1.7	%
Non-owner occupied	35,473		—		35,473		1.6	%
Total restaurant/bar facilities	$	74,636	$	245	$	74,881	3.3	%












Other (a)	559,559		36,758		596,317		26.3	%
Total commercial real estate, other	$	2,189,984	$	80,527	$	2,270,511	100.0	%

(a) All other total exposures by industry are less than 2% of the Total Exposure.

Peoples' commercial lending activities continue to focus on lending opportunities within Ohio, Kentucky, West Virginia, Virginia, Washington, D.C. and Maryland. For all other states, the aggregate outstanding balances of commercial loans in each state were less than 3% of total loans at both September 30, 2023 and December 31, 2022. The repayment of premium finance loans is secured by the underlying insurance policy prepaid premium, and therefore, has no geographical impact from a repayment perspective. The repayment of leases is secured by the underlying equipment collateral and not real estate, which mitigates geographic risk.

Small Business Administration Paycheck Protection Program ("PPP")

In March 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act created the PPP targeted to provide small businesses with support to cover payroll and certain other specified expenses. Loans made under the PPP are fully guaranteed by the U.S. Small Business Administration (the "SBA"). The PPP loans also afford borrowers forgiveness up to the principal amount of the PPP covered loan, plus accrued interest, if the loan proceeds are used to retain workers and maintain payroll and/or to make certain mortgage interest, lease and utility payments, and certain other criteria are satisfied. The SBA will reimburse PPP lenders for any

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amount of a PPP covered loan that is forgiven, and PPP lenders will not be held liable for any representations made by PPP borrowers in connection with their requests for loan forgiveness.

Peoples is a PPP participating lender, and the PPP loans originated are included in commercial and industrial loans. Peoples also recorded deferred loan origination fees related to the PPP loans, net of deferred loan origination costs, which will be amortized over the life of the respective loans, or until forgiven by the SBA, and will be recognized in net interest income. The following table details Peoples' PPP loan balances and related income:


(Dollars in thousands)	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
PPP aggregate outstanding principal balances	$	1,129	$	1,418	$	2,184	$	2,458	$	3,789
PPP net deferred loan origination fees	9		11		25		27		61
Accretion of net deferred loan origination fees	1		14		2		34		360

Allowance for Credit Losses

The amount of the allowance for credit losses at the end of each period represents management's estimate of expected losses from existing loans based upon its quarterly analysis of the loan portfolio. While this process involves allocations being made to specific loans and pools of loans, the entire allowance is available for all losses expected within the loan portfolio.

The following details management's allocation of the allowance for credit losses:


(Dollars in thousands)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
Construction	$	1,241		$	1,496		$	1,273		$	1,250		$	1,464
Commercial real estate, other	21,257			19,731			16,474			17,710			17,695
Commercial and industrial	10,205			11,028			8,307			8,229			8,611
Premium finance	476			431			433			344			553
Leases	11,692			10,377			9,109			8,495			7,890

Residential real estate	6,251			6,112			6,504			6,357			6,464
Home equity lines of credit	1,640			1,676			1,717			1,693			1,644
Consumer, indirect	7,516			7,610			7,781			7,448			6,912
Consumer, direct	2,519			2,642			1,619			1,575			1,592

Deposit account overdrafts	127			108			86			61			41
Allowance for credit losses	$	62,924		$	61,211		$	53,303		$	53,162		$	52,866
As a percent of total loans	1.03		%	1.02		%	1.12		%	1.13		%	1.15		%

The increase in the allowance for credit losses at September 30, 2023 compared to June 30, 2023 was largely attributable to the deterioration in macro-economic conditions used within the CECL model, partially offset by the release of reserves on individually analyzed loans. The increase in the allowance for credit losses at September 30, 2023 and at June 30, 2023, when compared to the prior periods presented was driven by the establishment of an allowance for credit losses for loans acquired in the Limestone Merger that were not considered purchased credit deteriorated.

Additional information regarding Peoples' allowance for credit losses can be found in "Note 1 Summary of Significant Accounting Policies" in Peoples' 2022 Form 10-K and "Note 4 Loans and Leases" of the Notes to the Unaudited Condensed Consolidated Financial Statements in this Form 10-Q.

The following table summarizes Peoples’ net charge-offs and recoveries:


	Three Months Ended
(Dollars in thousands)	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
Gross charge-offs:
Construction	$	—	$	—	$	9	$	16	$	—
Commercial real estate, other	278		7		33		132		57
Commercial and industrial	199		11		1		24		36
Premium finance	33		23		23		42		38
Leases	905		604		469		888		731
Residential real estate	50		59		41		144		168
Home equity lines of credit	32		55		19		42		5

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	Three Months Ended
(Dollars in thousands)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
Consumer, indirect	926			941			929			799			600
Consumer, direct	92			78			104			86			81
Consumer	1,018			1,019			1,033			885			681
Deposit account overdrafts	319			263			227			308			274
Total gross charge-offs	$	2,834		$	2,041		$	1,855		$	2,481		$	1,990
Recoveries:

Commercial real estate, other	$	97		$	16		$	27		$	33		$	39
Commercial and industrial	3			451			—			40			3
Premium finance	12			3			9			4			1
Leases	168			89			80			81			99
Residential real estate	27			69			29			20			36
Home equity lines of credit	—			—			—			16			—
Consumer, indirect	149			129			79			88			71
Consumer, direct	11			35			15			16			9
Consumer	160			164			94			104			80
Deposit account overdrafts	49			53			72			50			44
Total recoveries	$	516		$	845		$	311		$	348		$	302
Net charge-offs (recoveries):
Construction	$	—		$	—		$	9		$	16		$	—
Commercial real estate, other	181			(9)			6			99			18
Commercial and industrial	196			(440)			1			(16)			33
Premium finance	21			20			14			38			37
Leases	737			515			389			807			632
Residential real estate	23			(10)			12			124			132
Home equity lines of credit	32			55			19			26			5
Consumer, indirect	777			812			850			711			529
Consumer, direct	81			43			89			70			72
Consumer	858			855			939			781			601
Deposit account overdrafts	270			210			155			258			230
Total net charge-offs	$	2,318		$	1,196		$	1,544		$	2,133		$	1,688
Ratio of net charge-offs (recoveries) to average total loans (annualized):
Construction	—		%	—		%	—		%	—		%	—		%
Commercial real estate, other	0.01		%	—		%	—		%	0.01		%	—		%
Commercial and industrial	0.01		%	(0.03)		%	—		%	—		%	—		%
Premium finance	—		%	—		%	—		%	—		%	—		%
Leases	0.05		%	0.04		%	0.04		%	0.07		%	0.06		%
Residential real estate	—		%	—		%	—		%	0.01		%	0.01		%
Home equity lines of credit	—		%	—		%	—		%	—		%	—		%
Consumer, indirect	0.05		%	0.06		%	0.07		%	0.06		%	0.05		%
Consumer, direct	0.01		%	—		%	0.01		%	0.01		%	0.01		%
Consumer	0.06		%	0.06		%	0.08		%	0.07		%	0.06		%
Deposit account overdrafts	0.02		%	0.02		%	0.01		%	0.02		%	0.02		%
Total	0.15		%	0.09		%	0.13		%	0.18		%	0.15		%

Each with "--%" not meaningful.

Total net charge-offs during the third quarter of 2023 were $2.3 million, or 0.15% of average total loans on an annualized basis, compared to $1.2 million, or 0.09% of average total loans on an annualized basis, during the second quarter of 2023 and $1.7 million, or 0.15% of average total loans on an annualized basis, during the third quarter of 2022. The increase for the third quarter of 2023 when compared to the linked quarter was driven by an increase in net charge-offs on leases, commercial real estate loans and commercial and industrial loans during the third quarter of 2023. The increase in net charge-offs during the third quarter of 2023 versus the prior year third quarter was primarily attributable to an increase in charge-offs on indirect consumer loans, commercial real estate loans and leases, partially offset by an increase in recoveries.

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The following table details Peoples’ nonperforming assets:


(Dollars in thousands)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
Loans 90+ days past due and accruing:

Commercial real estate, other	$	487		$	15		$	150		$	167		$	1,472
Commercial and industrial	67			—			228			130			266
Premium finance	1,581			987			764			504			308
Leases	6,007			3,847			2,491			3,041			4,654
Residential real estate	736			856			238			917			1,499
Home equity lines of credit	177			148			127			58			23
Consumer, indirect	47			40			13			—			195
Consumer, direct	15			31			3			25			7
Consumer	62			71			16			25			202
Total loans 90+ days past due and accruing	$	9,117		$	5,924		$	4,014		$	4,842		$	8,424
Nonaccrual loans:
Construction	$	—		$	—		$	1		$	12		$	2
Commercial real estate, other	3,661			8,987			11,345			12,121			11,916
Commercial and industrial	3,116			3,438			3,064			3,462			2,385
Leases	7,929			4,800			3,884			3,178			2,094
Residential real estate	8,454			8,393			8,641			9,496			8,728
Home equity lines of credit	1,026			841			793			820			921
Consumer, indirect	1,904			1,982			2,147			2,176			1,627
Consumer, direct	97			355			105			208			158
Consumer	2,001			2,337			2,252			2,384			1,785
Total nonaccrual loans	$	26,187		$	28,796		$	29,980		$	31,473		$	27,831










Total nonperforming loans ("NPLs")	$	35,304		$	34,720		$	33,994		$	36,315		$	36,255
OREO:
Commercial	$	7,118		$	7,118		$	8,730		$	8,730		$	8,730
Residential	56			48			48			165			110
Total OREO	$	7,174		$	7,166		$	8,778		$	8,895		$	8,840
Total nonperforming assets ("NPAs")	$	42,478		$	41,886		$	42,772		$	45,210		$	45,095
Criticized loans (a)	$	213,156		$	219,885		$	198,812		$	191,355		$	164,775
Classified loans (b)	$	124,836		$	110,972		$	93,168		$	89,604		$	94,848
Asset Quality Ratios (c):
Nonaccrual loans as a percent of total loans (d)	0.43		%	0.48		%	0.63		%	0.67		%	0.60		%
NPLs as a percent of total loans (d)	0.58		%	0.58		%	0.71		%	0.77		%	0.79		%
NPAs as a percent of total assets (d)	0.48		%	0.48		%	0.58		%	0.63		%	0.64		%
NPAs as a percent of total loans and OREO (d)	0.70		%	0.70		%	0.90		%	0.96		%	0.98		%
Allowance for credit losses as a percent of nonaccrual loans	240.29		%	212.57		%	177.80		%	168.91		%	189.95		%
Allowance for credit losses as a percent of NPLs (d)	178.23		%	176.30		%	156.80		%	146.39		%	145.82		%
Criticized loans as a percent of total loans (a)	3.50		%	3.68		%	4.18		%	4.07		%	3.57		%
Classified loans as a percent of total loans (b)	2.05		%	1.86		%	1.96		%	1.90		%	2.06		%

(a) Includes loans categorized as special mention, substandard or doubtful.

(b) Includes loans categorized as substandard or doubtful.

(d) NPLs include loans 90+ days past due and accruing and nonaccrual loans. NPLs in periods prior to March 31, 2023 also included TDRs. NPAs include nonperforming loans and OREO.

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Compared to at June 30, 2023, Peoples' NPAs were stable at 0.48% of total assets. Total loans 90+ days past due and accruing increased at September 30, 2023 compared to at June 30, 2023, mostly due to increases in nonperforming leases and premium finance loans. Total nonaccrual loans decreased at September 30, 2023 compared to at June 30, 2023, mostly due to a decrease in nonaccrual commercial real estate loans, partially offset by an increase in nonaccrual leases. During the third quarter of 2023, criticized loans decreased $6.7 million, while classified loans increased $13.9 million when compared to at June 30, 2023. The decrease in the amounts of criticized loans compared to at June 30, 2023 was primarily driven by criticized loan pay-offs, partially offset by loan downgrades. The increase in the amount of classified loans compared to at June 30, 2023 was primarily driven by loan downgrades, partially offset by classified loan pay-offs.

Deposits

The following table details Peoples’ deposit balances:


(Dollars in thousands)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
Non-interest-bearing deposits (a)	$	1,569,095		$	1,682,634		$	1,555,064		$	1,589,402		$	1,635,953
Interest-bearing deposits:
Interest-bearing demand accounts (a)	1,181,079			1,225,646			1,085,169			1,160,182			1,162,012
Savings accounts	987,170			1,116,622			1,024,638			1,068,547			1,077,383
Retail CDs	1,198,733			950,783			622,091			530,236			544,741
Money market deposit accounts	730,902			718,633			579,106			617,029			624,708
Governmental deposit accounts	761,625			705,596			649,303			625,965			734,734
Brokered CDs	608,914			559,955			273,156			125,580			86,089
Total interest-bearing deposits	5,468,423			5,277,235			4,233,463			4,127,539			4,229,667
Total deposits	$	7,037,518		$	6,959,869		$	5,788,527		$	5,716,941		$	5,865,620
Demand deposits as a percent of total deposits	39		%	42		%	46		%	48		%	48		%

(a)The sum of amounts presented is considered total demand deposits.

At September 30, 2023, period-end total deposits increased $77.6 million, or 1%, compared to at June 30, 2023, primarily driven by increases of (i) $248.0 million in retail CDs, (ii) $56.0 million in governmental deposits and (iii) $49.0 million in brokered CDs, which are primarily used as a source of funding, partially offset by decreases of (i) $129.5 million in savings accounts, (ii) $113.5 million in non-interest-bearing demand deposit accounts, and (iii) $44.6 million in interest-bearing demand deposit accounts. The increase in governmental deposit accounts was due to the seasonality of those balances, which are typically higher in the first quarter and third quarter of each year.

At September 30, 2023, period-end total deposits increased $1.2 billion, or 20%, compared to at September 30, 2022, primarily driven by deposits acquired in the Limestone Merger. Excluding Limestone deposit balances, period-end deposit balances at September 30, 2023 increased $251.1 million compared to at September 30, 2022. The increase was primarily driven by increases of $522.8 million in brokered deposits and $429.6 million in retail CDs, partially offset by decreases of $250.0 million, $189.5 million, $175.9 million and $78.8 million in non-interest bearing demand deposit accounts, savings accounts, interest-bearing demand deposit accounts and governmental deposit accounts, respectively.

As part of its funding strategy, Peoples hedges 90-day brokered CDs with interest rate swaps. The interest rate swaps pay a fixed rate of interest while receiving a floating rate component of interest tied to term SOFR, which offsets the rate on the brokered CDs. As of September 30, 2023, Peoples had eleven effective interest rate swaps, with an aggregate notional value of $105.0 million, which were designated as cash flow hedges of overnight brokered CDs and are expected to be extended every 90 days through the maturity dates of the interest rate swaps. Peoples continually evaluates the overall balance sheet position given the interest rate environment.

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Borrowed Funds

The following table details Peoples’ short-term borrowings and long-term borrowings:


(Dollars in thousands)	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
Short-term borrowings:
Overnight borrowings	$	484,000	$	444,000	$	390,000	$	400,000	$	(5,000)
FHLB 90-day advances	—		—		—		—		40,000

Retail repurchase agreements	101,437		125,935		100,670		100,138		98,611

Total short-term borrowings	$	585,437	$	569,935	$	490,670	$	500,138	$	133,611
Long-term borrowings:
FHLB advances	$	83,247	$	33,755	$	33,941	$	34,158	$	34,662


Vantage non-recourse debt	41,783		41,963		47,864		53,147		55,781
Other long-term borrowings	48,282		47,861		13,824		13,788		13,753
Total long-term borrowings	$	173,312	$	123,579	$	95,629	$	101,093	$	104,196
Total borrowed funds	$	758,749	$	693,514	$	586,299	$	601,231	$	237,807

Total borrowed funds, which include overnight borrowings, are mainly a function of loan growth and changes in total deposit balances. Other long-term borrowings include trust preferred securities held for investments and floating rate junior subordinated deferrable interest debentures. Total borrowed funds at September 30, 2023 increased compared to June 30, 2023, primarily due to an increase in long-term FHLB advances and higher overnight borrowings. Total short-term borrowings at September 30, 2023 increased when compared to at September 30, 2022 due to outstanding FHLB overnight borrowings of $484.0 million at September 30, 2023, partially offset by a decrease in retail repurchase agreements. Total long-term borrowings at September 30, 2023 increased when compared to at September 30, 2022 due to an increase in FHLB advances and other long-term borrowings assumed in the Limestone Merger, partially offset by a reduction in Vantage non-recourse debt.

Capital/Stockholders’ Equity

At September 30, 2023, capital levels for both Peoples and Peoples Bank remained substantially higher than the minimum amounts needed to be considered "well capitalized" institutions under applicable banking regulations. These higher capital levels reflect Peoples' desire to maintain a strong capital position. In order to avoid limitations on dividends, equity repurchases and compensation, Peoples must exceed the three minimum required ratios by at least the capital conservation buffer of 2.50%, which applies to the common equity tier 1 ("CET1") ratio, the tier 1 capital ratio and the total risk-based capital ratio. At September 30, 2023, Peoples had a capital conservation buffer of 5.14%.

The following table details Peoples' risk-based capital levels and corresponding ratios:


(Dollars in thousands)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
Capital Amounts:
Common Equity Tier 1	$	752,728		$	728,892		$	624,292		$	604,566		$	584,880
Tier 1	801,010			776,753			638,116			618,354			598,633
Total (Tier 1 and Tier 2)	855,054			828,910			682,477			662,421			643,189
Net risk-weighted assets	$	6,505,779		$	6,417,511		$	5,110,318		$	5,071,240		$	4,955,627
Capital Ratios:
Common Equity Tier 1	11.57		%	11.36		%	12.22		%	11.92		%	11.80		%
Tier 1	12.31		%	12.10		%	12.49		%	12.19		%	12.08		%
Total (Tier 1 and Tier 2)	13.14		%	12.92		%	13.35		%	13.06		%	12.98		%
Tier 1 leverage ratio	9.34		%	9.64		%	9.02		%	8.92		%	8.64		%

Peoples' risk-risk based capital ratios at September 30, 2023 increased slightly when compared to June 30, 2023, due to higher net income, primarily due to a full quarter of net income from the Limestone Merger compared to only two months of income in the linked quarter, partially offset by an increase in expenses from the Limestone Merger. Compared to at September 30, 2022 and at December 31, 2022, the tier 1 risk-based capital and the total risk-based capital ratios improved due to higher net income, partially offset by the impact of the Limestone Merger and dividends paid. The common equity tier 1 risk-based capital ratio at September 30, 2023 decreased compared to at December 31, 2022 and September 30, 2022 due to the common shares issued in the Limestone Merger.

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In addition to traditional capital measurements, management uses tangible capital measures to evaluate the adequacy of Peoples' stockholders' equity. Such ratios represent Non-US GAAP financial measures since their calculation removes the impact of goodwill and other intangible assets acquired through acquisitions on amounts reported in the Unaudited Consolidated Balance Sheets. Management believes this information is useful to investors since it facilitates the comparison of Peoples' operating performance, financial condition and trends to peers, especially those without a similar level of intangible assets to that of Peoples. Further, intangible assets generally are difficult to convert into cash, especially during a financial crisis, and could decrease substantially in value should there be deterioration in the overall franchise value. As a result, tangible equity represents a conservative measure of the capacity for Peoples to incur losses but remain solvent.

The following table reconciles the calculation of these Non-US GAAP financial measures to amounts reported in Peoples' Unaudited Condensed Consolidated Financial Statements:


(Dollars in thousands)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
Tangible equity:
Total stockholders' equity	$	993,219		$	998,907		$	819,543		$	785,328		$	760,511
Less: goodwill and other intangible assets	408,494			413,172			324,562			326,329			328,428
Tangible equity	$	584,725		$	585,735		$	494,981		$	458,999		$	432,083






Tangible assets:
Total assets	$	8,942,534		$	8,786,635		$	7,311,520		$	7,207,304		$	7,005,854
Less: goodwill and other intangible assets	408,494			413,172			324,562			326,329			328,428
Tangible assets	$	8,534,040		$	8,373,463		$	6,986,958		$	6,880,975		$	6,677,426

Tangible book value per common share:
Tangible equity	$	584,725		$	585,735		$	494,981		$	458,999		$	432,083
Common shares outstanding	35,395,990			35,374,916			28,488,158			28,287,837			28,278,078

Tangible book value per common share	$	16.52		$	16.56		$	17.37		$	16.23		$	15.28

Tangible equity to tangible assets ratio:
Tangible equity	$	584,725		$	585,735		$	494,981		$	458,999		$	432,083
Tangible assets	$	8,534,040		$	8,373,463		$	6,986,958		$	6,880,975		$	6,677,426

Tangible equity to tangible assets	6.85		%	7.00		%	7.08		%	6.67		%	6.47		%

The decrease in tangible book value per common share at September 30, 2023 and at June 30, 2023, compared to at March 31, 2023, was due to the 6.8 million common shares issued as consideration in the Limestone Merger. Tangible book value per common share at September 30, 2023 increased compared to at September 30, 2022 primarily due to net income over the last twelve months, which was partially offset by an increase in accumulated other comprehensive loss as well as the impact of the common shares issued in the Limestone Merger mentioned above.

Interest Rate Sensitivity and Liquidity

While Peoples is exposed to various business risks, the risks relating to interest rate sensitivity and liquidity are major risks that can materially impact future results of operations and financial condition due to their complexity and dynamic nature. The objective of Peoples' asset-liability management function is to measure and manage these risks in order to optimize net interest income within the constraints of prudent capital adequacy, liquidity and safety. This objective requires Peoples to focus on interest rate risk exposure and adequate liquidity through its management of the mix of assets and liabilities, their related cash flows and the rates earned and paid on those assets and liabilities. Ultimately, the asset-liability management function is intended to guide management in the acquisition and disposition of earning assets and selection of appropriate funding sources.

Interest Rate Risk

Interest rate risk ("IRR") is one of the most significant risks arising in the normal course of business of financial services companies like Peoples. IRR is the potential for economic loss due to future interest rate changes that can impact the earnings stream, as well as market values, of financial assets and financial liabilities. Peoples' exposure to IRR is due primarily to differences in the maturity or repricing of earning assets and interest-bearing liabilities. In addition, other factors, such as prepayments of loans and investment securities, or early withdrawal of deposits, can affect Peoples' exposure to IRR and impact interest costs or revenue streams.

Peoples has assigned overall management of IRR to its Asset-Liability Committee (the “ALCO”), which has established an IRR management policy that sets minimum requirements and guidelines for monitoring and managing the level of IRR. In light of recent bank failures, Peoples revisited the model assumptions during 2023, and determined the methods used by the ALCO to assess IRR remain appropriate and are largely unchanged from those disclosed in Peoples' 2022 Form 10-K.

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The following table shows the estimated changes in net interest income and the economic value of equity based upon a standard, parallel shock analysis with balances held constant (dollars in thousands):


Increase (Decrease) in Interest Rate	Estimated Increase (Decrease) in Net Interest Income								Estimated (Decrease) Increase in Economic Value of Equity
(in Basis Points)	September 30, 2023				December 31, 2022				September 30, 2023				December 31, 2022
300	$	7,122	2.1	%	$	13,000	4.4	%	$	(182,388)	(11.0)	%	$	(82,959)	(5.4)	%
200	4,789		1.4	%	8,716		3.0	%	(126,355)		(7.7)	%	(55,809)		(3.6)	%
100	2,410		0.7	%	4,380		1.5	%	(66,132)		(4.0)	%	(28,157)		(1.8)	%
(100)	(4,475)		(1.3)	%	(11,404)		(3.9)	%	44,731		2.7	%	(21,124)		(1.4)	%
(200)	(12,836)		(3.9)	%	(27,659)		(9.4)	%	76,791		4.7	%	(80,484)		(5.2)	%
(300)	(22,460)		(6.8)	%	(43,728)		(14.8)	%	100,065		6.1	%	(152,152)		(9.8)	%

This table uses a standard, parallel shock analysis for assessing the IRR to net interest income and the economic value of equity. A parallel shock assumes all points on the yield curve (one year, two year, three year, etc.) are directionally changed by the same degree. Management regularly assesses the impact of both increasing and decreasing interest rates. The table above shows the impact of upward and downward parallel shocks of 100, 200 and 300 basis points.

Estimated changes in net interest income and the economic value of equity are partially driven by assumptions regarding the rate at which non-maturity deposits will reprice given a move in short-term interest rates, as well as assumptions regarding prepayment speeds on mortgage-backed securities. These and other modeling assumptions are monitored closely by Peoples on an ongoing basis.

While parallel interest rate shock scenarios are useful in assessing the level of IRR inherent in the balance sheet, interest rates typically move in a nonparallel manner with differences in the timing, direction and magnitude of changes in short-term and long-term interest rates. Thus, any impact that might occur as a result of the Federal Reserve Board increasing short-term interest rates in the future could be offset by an inverse movement in long-term interest rates, and vice versa. For this reason, Peoples considers other interest rate scenarios in addition to analyzing the impact of parallel yield curve shifts. These include various flattening and steepening scenarios in which short-term and long-term interest rates move in different directions with varying magnitude. Peoples believes these scenarios to be more reflective of how interest rates change versus the severe parallel rate shocks described above. Given the shape of market yield curves at September 30, 2023, consideration of the bear steepener and bear flattener scenarios provide insights which were not captured by parallel shifts.

The bear steepener scenario highlights the risk to net interest income and economic value of equity when short-term interest rates remain constant while long-term interest rates rise. In such a scenario, Peoples' deposit and borrowing costs, which are generally correlated with short-term interest rates, remain constant, while asset yields, which are correlated with long-term interest rates, rise. At September 30, 2023, the bear steepener scenario produced an increase in net interest income of 0.10% and a decline in the economic value of equity of 2.20%.

The bear flattener scenario highlights the risk to net interest income and the economic value of equity when short-term rates rise while long-term rates remain constant. In such a scenario, Peoples' variable rate asset yields along with deposit and short-term borrowing costs, which are correlated with short-term rates, increase, while long-term asset yields and long-term borrowing costs, which are more correlated with long-term rates, remain constant. Increased deposit and funding costs would be more than offset by increased variable rate asset yields; resulting in an increased amount of net interest income and a higher net interest margin. At September 30, 2023, the bear flattener scenario produced a decline of 0.80% to net interest income and a decline in the economic value of equity of 0.90%.

Peoples has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for Peoples making fixed payments. As of September 30, 2023, Peoples had entered into eleven interest rate swap contracts with an aggregate notional value of $105.0 million. Additional information regarding Peoples’ interest rate swaps can be found in “Note 10 Derivative Financial Instruments” of the Notes to the Unaudited Condensed Consolidated Financial Statements.

At September 30, 2023, Peoples' Unaudited Consolidated Balance Sheet was positioned to benefit from rising interest rates in terms of the potential impact on net interest income. The table above illustrates this point as changes to net interest income increase in the rising interest rate scenarios. While the heavy concentration of floating rate loans remains the largest contributor to the level of asset sensitivity, the decrease in economic value of equity asset sensitivity, as measured, from December 31, 2022 was largely attributable to increased effective duration within the investment securities portfolio.

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Liquidity

In addition to IRR management, another major objective of the ALCO is to maintain a sufficient level of liquidity. In light of recent bank failures, Peoples revisited the model assumptions, and determined the methods used by the ALCO to monitor and evaluate the adequacy of Peoples Bank's liquidity position remain appropriate and are largely unchanged from those disclosed in Peoples' 2022 Form 10-K.

At September 30, 2023, Peoples Bank had liquid assets of $357.6 million, which represented 3.6% of total assets and unfunded loan commitments. Peoples also had an additional $219.1 million of unpledged investment securities not included in the measurement of liquid assets.

Management believes the current mix of short-term liquidity sources, loan and security portfolio cash flows, and availability of other funding sources will allow Peoples to meet anticipated cash obligations, as well as special needs and off-balance sheet commitments.

Off-Balance Sheet Activities and Contractual Obligations

In the normal course of business, Peoples is a party to financial instruments with off-balance sheet risk necessary to meet the financing needs of Peoples' customers. These financial instruments include commitments to extend credit and standby letters of credit. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Unaudited Consolidated Balance Sheets. The contract amounts of these instruments express the extent of involvement Peoples has in these financial instruments.

Loan Commitments and Standby Letters of Credit

Loan commitments are made to accommodate the financial needs of Peoples' customers. Standby letters of credit are instruments issued by Peoples Bank guaranteeing the beneficiary payment by Peoples Bank in the event of default by Peoples Bank's customer in the performance of an obligation or service. Historically, most loan commitments and standby letters of credit expire unused. Peoples Bank's exposure to credit loss in the event of nonperformance by the counter-party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amount of those instruments. Peoples Bank uses the same underwriting standards in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties.

Peoples Bank routinely engages in activities that involve, to varying degrees, elements of risk that are not reflected in whole or in part in the Unaudited Condensed Consolidated Financial Statements. These activities are part of Peoples Bank's normal course of business and include traditional off-balance sheet credit-related financial instruments, interest rate contracts and commitments to make additional capital contributions in low-income housing tax credit investments. Traditional off-balance sheet credit-related financial instruments continue to represent the most significant off-balance sheet exposure.

The following table details the total contractual amount of loan commitments and standby letters of credit:


(Dollars in thousands)	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
Home equity lines of credit	$	245,764	$	208,805	$	201,692	$	197,995	$	194,685
Unadvanced construction loans	351,473		293,662		241,225		270,229		320,825
Other loan commitments	768,788		597,285		717,149		730,015		653,384
Loan commitments	$	1,366,025	$	1,099,752	$	1,160,066	$	1,198,239	$	1,168,894
Standby letters of credit	$	15,452	$	14,760	$	15,046	$	15,451	$	15,096

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this Item 3 is provided under the caption “Interest Rate Sensitivity and Liquidity” under “ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in this Form 10-Q, and is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Peoples' management, with the participation of Peoples' President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer, has evaluated the effectiveness of Peoples’ disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2023. Based upon that evaluation, Peoples’ President and Chief Executive Officer and Peoples’ Executive Vice President, Chief Financial Officer and Treasurer have concluded that:

(a)information required to be disclosed by Peoples in this Quarterly Report on Form 10-Q and other reports Peoples files or submits under the Exchange Act would be accumulated and communicated to Peoples’ management,

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including its President and Chief Executive Officer and its Executive Vice President, Chief Financial Officer and Treasurer, as appropriate to allow timely decisions regarding required disclosure;

(b)information required to be disclosed by Peoples in this Quarterly Report on Form 10-Q and other reports Peoples files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

(c)Peoples’ disclosure controls and procedures were effective as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no changes in Peoples' internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during Peoples' fiscal quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, Peoples’ internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Peoples or one of its subsidiaries from time to time is engaged in various litigation matters including the defense of claims of improper loan or deposit practices or lending violations. In addition, in the ordinary course of their respective businesses or operations, Peoples or one of its subsidiaries may be named as a plaintiff, a defendant, or a party to a legal proceeding or any of their respective properties may be subject to various pending and threatened legal proceedings and various actual and potential claims. In view of the inherent difficulty of predicting the outcome of such matters, Peoples cannot state what the eventual outcome of any such matters will be; however, based on management's current knowledge and after consultation with legal counsel, Peoples' management believes that damages, if any, and other amounts related to pending legal proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of Peoples.

ITEM 1A. RISK FACTORS

The disclosure below supplements the risk factors previously disclosed under “ITEM 1A. RISK FACTORS” of Part I of Peoples’ 2022 Form 10-K. These risk factors are not the only risks Peoples faces. Additional risks and uncertainties not currently known to management or that management currently deems to be immaterial also may materially adversely affect Peoples’ business, financial condition and/or operating results. In the first nine months of 2023, management identified the following additional risk factors:

Business Operations Risks

•Peoples could experience an unexpected inability to obtain needed liquidity which could adversely affect our business, profitability, and viability as a going concern.

Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of interest rate market opportunities and is essential to a financial institution’s business. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets, and its access to alternative sources of funds. The bank failures in 2023 exemplify the potential serious results of the unexpected inability of insured depository institutions to obtain needed liquidity to satisfy deposit withdrawal requests, including how quickly such requests can accelerate once uninsured depositors lose confidence in an institution's ability to satisfy its obligations to depositors. Peoples seeks to ensure its funding needs are met by maintaining a level of liquidity through asset and liability management. If Peoples becomes unable to obtain funds when needed, it could have a material adverse effect on Peoples' business, financial condition, and results of operations.

General Risks

•The impact of larger or similar-sized financial institutions encountering problems may adversely affect Peoples' business, earnings and financial condition.

Peoples is exposed to the risk that when a peer financial institution experiences financial difficulties, there could be an adverse impact on the regional banking industry and the business environment in which Peoples operates. The recent bank failures of Silicon Valley Bank in California, Signature Bank in New York, First Republic Bank in California, and Heartland Tri-State Bank in Kansas during the first, second, and third quarters of 2023 have caused a degree of panic and uncertainty in the investor community and among bank customers generally. While Peoples does not believe that the circumstances of these four banks' failures are indicators of broader issues with the banking system, the failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the banking industry, including Peoples. Peoples will continue to monitor the ongoing events concerning these four banks as well as any future potential bank failures and volatility within the banking industry generally, together with any responsive measures taken by the banking regulators to mitigate or manage potential turmoil in the banking industry.

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•Peoples may experience one or more security breaches through one or more technological systems.

Information security risks have increased due to the sophistication and activities of organized crime, hackers, terrorists and other external parties and the use of online, telephone, and mobile banking channels by clients. Any compromise to Peoples' information security could impair Peoples' reputation and deter Peoples' clients from using Peoples' banking services. Information security breaches can also disrupt the operation of information systems on which Peoples and its customers depend, adversely affecting business operations. Such events can result in costly remediation measures and litigation or governmental investigation and responding to security breaches can place unanticipated demands on the time and attention of management. Peoples relies on security systems to provide the protection and authentication necessary to secure transmission of data against damage by theft, fire, power loss, telecommunications failure or similar catastrophic event, as well as from security breaches, ransomware, denial of service attacks, viruses, worms, and other disruptive problems caused by hackers. Computer break-ins, phishing and other disruptions of customer or vendor systems could also jeopardize the security of information stored in and transmitted through Peoples' computer systems and network infrastructure. Peoples maintains a cyber-insurance policy that is designed to cover a majority of loss resulting from cyber security breaches, but there is no assurance such coverage or other protective measures Peoples employs will be adequate to address all potential material adverse impacts.

Peoples associates also confront the risk of being compromised by emails sent by perpetrators posing as company executives or vendors in order to dupe Peoples' personnel into sending large sums of money to accounts controlled by the perpetrators. Peoples requires all employees to complete annual information security awareness training to increase their awareness of these risks and to engage them in Peoples' mitigation efforts. If these precautions are not sufficient to protect Peoples' systems from data breaches or compromises, Peoples' reputation and business could be adversely affected.

Peoples depends on the services of a variety of third-party vendors to meet data processing and communication needs, and Peoples has contracted with third parties to run their proprietary software on Peoples' behalf. While Peoples performs reviews of security controls instituted by the vendor in accordance with industry standards and institutes Peoples' own internal security controls, Peoples relies on continued maintenance of the controls by the outside party to safeguard customer data.

Additionally, Peoples issues debit cards which are susceptible to compromise at the point of sale via the physical terminal through which transactions are processed and by other means of hacking. The security and integrity of these transactions are dependent upon the retailers’ vigilance and willingness to invest in technology and upgrades. Issuing debit cards to Peoples' clients exposes Peoples to potential losses which, in the event of a data breach at one or more major retailers may adversely affect Peoples' business, financial condition, and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)Not applicable.

(b)Not applicable.

(c)The following table details repurchases by Peoples and purchases by “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Exchange Act of Peoples’ common shares during the three months ended September 30, 2023:


Period	Total Number of Common Shares Purchased		Average Price Paid per Common Share			Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Common Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1 – 31, 2023	8,083	(2)(3)	$	26.83	(2)(3)	—	$	22,606,290
August 1 – 31, 2023	—		$	—		—	$	22,606,290
September 1 – 30, 2023	1,291	(2)	$	25.66	(2)	—	$	22,606,290
Total	9,374		$	26.67		—	$	22,606,290

(1)On January 29, 2021, Peoples announced that on January 28, 2021, Peoples' Board of Directors authorized a share repurchase program authorizing Peoples to purchase up to an aggregate of $30 million of Peoples' outstanding common shares. There were no common shares repurchased under the share repurchase program during the three months ended September 30, 2023.

(2)Information reported includes 2,236 common shares and 1,291 common shares purchased in open market transactions during July 2023 and September 2023, respectively, by Peoples Bank under the Rabbi Trust Agreement. The Rabbi Trust Agreement establishes a rabbi trust that holds assets to provide funds for the payment of the benefits under the Peoples Bancorp Inc. Third Amended and Restated Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries.

(3)Information reported includes 5,847 common shares withheld to satisfy income taxes associated with restricted common shares which were granted under the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan (now known as the Peoples Bancorp Inc. Fourth Amended and Restated 2006 Equity Plan) and vested during July 2023.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a)None.

(b)Not applicable.

(c)During the three months ended September 30, 2023, no director of Peoples and no officer of Peoples (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6. EXHIBITS

Exhibit
Number

Description

Exhibit Location

2.1

Agreement and Plan of Merger, dated as of March 26, 2021, by and between Peoples Bancorp Inc. and Premier Financial Bancorp, Inc.+

Included as Annex A to the preliminary joint proxy statement/prospectus which forms a part of the Registration Statement of Peoples Bancorp Inc. ("Peoples") on Form S-4/A accepted on May 28, 2021 with a filing date of June 1, 2021 (Registration No. 333-256040)

2.2

Agreement and Plan of Merger, dated as of October 24, 2022, by and between Peoples Bancorp Inc. and Limestone Bancorp, Inc.+

Included as Annex A to the preliminary joint proxy statement/prospectus which forms a part of the Registration Statement of Peoples on Form S-4/A filed on January 6, 2023 (Registration No. 333-268728)

3.1(a)

Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on May 3, 1993) P

Incorporated herein by reference to Exhibit 3(a) to Peoples' Registration Statement on Form 8-B filed on July 20, 1993 (File No. 0-16772)

3.1(b)

Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 22, 1994)

Incorporated herein by reference to Exhibit 3.1(b) to Peoples' Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 (File No. 0-16772) ("Peoples' September 30, 2017 Form 10-Q")

3.1(c)

Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 9, 1996)

Incorporated herein by reference to Exhibit 3.1(c) to Peoples' September 30, 2017 Form 10-Q

3.1(d)

Certificate of Amendment to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on April 23, 2003)

Incorporated herein by reference to Exhibit 3(a) to Peoples’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 (File No. 0-16772) (“Peoples’ March 31, 2003 Form 10-Q”)

3.1(e)

Certificate of Amendment by Shareholders to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on January 22, 2009)

Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on January 23, 2009 (File No. 0-16772)

3.1(f)

Certificate of Amendment by Directors to Articles filed with the Ohio Secretary of State on January 28, 2009, evidencing adoption of amendments by the Board of Directors of Peoples Bancorp Inc. to Article FOURTH of the Amended Articles of Incorporation to establish express terms of Fixed Rate Cumulative Perpetual Preferred Shares, Series A, each without par value, of Peoples Bancorp Inc.

Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on February 2, 2009 (File No. 0-16772)

3.1(g)

Certificate of Amendment by the Shareholders to the Amended Articles of Incorporation of Peoples Bancorp Inc. (as filed with the Ohio Secretary of State on July 28, 2021)

Incorporated herein by reference to Exhibit 3.1(g) to Peoples' Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 (File No. 0-16772) ("Peoples' June 30, 2021 Form 10-Q")

3.1(h)

Amended Articles of Incorporation of Peoples Bancorp Inc. (representing the Amended Articles of Incorporation in compiled form incorporating all amendments through the date of this Quarterly Report on Form 10-Q) [For purposes of SEC reporting compliance only--not filed with Ohio Secretary of State]

Incorporated herein by reference to Exhibit 3.1(h) to Peoples' June 30, 2021 Form 10-Q

3.2(a)

Code of Regulations of Peoples Bancorp Inc. P

Incorporated herein by reference to Exhibit 3(b) to Peoples’ Registration Statement on Form 8-B filed on July 20, 1993 (File No. 0-16772)

3.2(b)

Certified Resolutions Regarding Adoption of Amendments to Sections 1.03, 1.04, 1.05, 1.06, 1.08, 1.10, 2.03(C), 2.07, 2.08, 2.10 and 6.02 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 10, 2003

Incorporated herein by reference to Exhibit 3(c) to Peoples’ March 31, 2003 Form 10-Q

+Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K. A copy of any omitted schedules or exhibits will be furnished supplementally by Peoples Bancorp Inc. to the SEC, or the staff of the SEC, on a confidential basis upon request.

PPeoples Bancorp Inc. filed this exhibit with the SEC in paper form originally and this exhibit has not been filed with the SEC in electronic format.

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Exhibit
Number

Description

Exhibit Location

3.2(c)

Certificate regarding adoption of amendments to Sections 3.01, 3.03, 3.04, 3.05, 3.06, 3.07, 3.08 and 3.11 of the Code of Regulations of Peoples Bancorp Inc. by shareholders on April 8, 2004

Incorporated herein by reference to Exhibit 3(a) to Peoples’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (File No. 0-16772)

3.2(d)

Certificate regarding adoption of amendments to Sections 2.06, 2.07, 3.01 and 3.04 of Peoples Bancorp Inc.’s Code of Regulations by the shareholders on April 13, 2006

Incorporated herein by reference to Exhibit 3.1 to Peoples’ Current Report on Form 8-K dated and filed on April 14, 2006 (File No. 0-16772)

3.2(e)

Certificate regarding adoption of an amendment to Section 2.01 of Peoples Bancorp Inc.’s Code of Regulations by the shareholders on April 22, 2010

Incorporated herein by reference to Exhibit 3.2(e) to Peoples’ Quarterly Report on Form 10-Q/A (Amendment No. 1) for the quarterly period ended June 30, 2010 (File No. 0-16772)

3.2(f)

Certificate regarding Adoption of Amendment to Division (D) of Section 2.02 of the Code of Regulations of Peoples Bancorp Inc. by the Shareholders at the Annual Meeting of Shareholders on April 26, 2018

Incorporated herein by reference to Exhibit 3.1 to Peoples' Current Report on Form 8-K dated and filed on June 28, 2018 (File No. 0-16772) ("Peoples' June 28, 2018 Form 8-K")

3.2(g)

Code of Regulations of Peoples Bancorp Inc. (This document represents the Code of Regulations of Peoples Bancorp Inc. in compiled form incorporating all amendments.)

Incorporated herein by reference to Exhibit 3.2 to Peoples' June 28, 2018 Form 8-K

10.1

Peoples Bancorp Inc. Change in Control Agreement between Peoples Bancorp Inc. and Matthew Macia (adopted August 21, 2023)++

Filed herewith

10.2

Peoples Bancorp Inc. Change in Control Agreement between Peoples Bancorp Inc. and Hugh Donlon (adopted September 9, 2023)++

Filed herewith

10.3

Form of Peoples Bancorp Inc. Fourth Amended and Restated 2006 Equity Plan Time-Based Restricted Stock Award Agreement used and to be used to evidence grants of time-based restricted common shares to executive officers of Peoples Bancorp Inc. after October 23, 2023++

Filed herewith

31.1

Rule 13a-14(a)/15d-14(a) Certifications [President and Chief Executive Officer]

Filed herewith

31.2

Rule 13a-14(a)/15d-14(a) Certifications [Executive Vice President, Chief Financial Officer and Treasurer]

Filed herewith

Section 1350 Certifications

Furnished herewith

101.INS

Inline XBRL Instance Document ##